How to Qualify For a FHA Loan in 11 Steps
Considering the benefits that come with FHA loans, one might believe that it is a hard loan to qualify for. If you have made up your mind and decided that a FHA loan is right for your mortgage, your down payment or equity in the property may be less than 20%. With FHA, as an owner you’re able to refinance up to 97.5% of your primary home’s value and from what we know, the good news is that you are only 11 steps away from qualifying for this type of home loan!
While going through the steps listed below, your confidence will strengthen as you become aware of what is required from you as a borrower and from the people involved in the process.
Step 1: Are You Eligible To Obtain A FHA Loan?
To begin, the requirements to qualify for a FHA loan are not rigid and make this an attractive loan choice for first time home buyers. Still, it is important to meet the majority of the requirements, if not all, and there are things you can do in advance to improve your chances of approval. To begin with, you will need to analyze your credit report to determine your chances of eligibility. When you’re doing this, be sure that everything is accurate because a lot of what affects your interest rate and approval decision depends on your credit history. Ultimately, the items in your credit report are what the lender might use to decide on the interest rate and loan options based on your overall profile.
Step 2: Make Sure You Know The Mortgage Industry Well!
Among the many lenders available in the mortgage industry, you must decide which one suits you and your requirements best. Is your lender a part-timer or is this a serious, reputable mortgage broker? Have some knowledge on the people and operations involved so that your work becomes easier.
Step 3: Obtain a Pre-Approval from the Bank
Obtaining an approval from the bank in advance can give you additional advantage over the other buyers. The seller is more likely to help you out than the others if you have a pre-approved letter from the bank regarding the amount of the loan. Also, in the case of a home purchase this will dramatically increase your odds that another buyer doesn’t beat you to the finish line when it comes to closing.
Step 4: Think Deeply Of Your Needs and Requirements
Make sure you have a clear idea in your mind about exactly what you want. Don’t limit yourself if you think funds will not be enough and know that many things are negotiable, as your realtor will tell you. Knowing your needs will smooth out the entire process. Additionally, sound knowledge of real estate industry will make things a lot easier for you and your seller.
Step 5: Discover How to Work With Real Estate Mediators
Be aware of the duties and responsibilities of a real estate agent before you start working with them. In many cases, they act as a seller, buyer or both. The more you understand where you fit in this picture, the better able you will understand some of the personal questions that are being asked of you.
Step 6: Begin Probing for a Home
Apart from studying the list provided to you by your agent, you can also go through classified ads or home for sale publications. Surfing the internet can also be a convenient option as well. Many websites such as Realtor.com offer easy, updated ways of browsing and most realtors will share their MLS home listing database with you.
Step 7: Reflect Over Your Housing Demands
This is one of the most crucial aspects that need consideration. Think over the type, size and features of the house you aspire to have. It may be helpful to create a list of must-haves versus nice-to-haves. Do you require a two car garage with a fenced backyard or do you want a managed property such as a luxury condominium or town home?
Step 8: Put Forth Your Pitch
The locality plays a key role in the offer that you are going to make as there are no fixed rules. You can seek assistance of house-buying tips to enhance your pitch. In this process, you are effectively pitching information that will expand on the lender’s understanding of your personal character, your capacity to fulfill obligations, how much capital you’ll put into the purchase via your down payment, economic conditions and where you fit, and any collateral that may serve as a secondary source of repayment in the event that you are unable to pay with cash.
Step 9: The Pre-Closing Inspection Phase
Prior to signing the closing contract, certain inspections are conducted to mitigate risk in the transaction. Your agent will help you out in conducting tests like full home inspections, property and pest tests. When selecting a qualified person to carry out your real estate inspection, it is likely that your real estate agent will know of some competent service professionals and it is important that you hire someone that will be very detail oriented. As an example, no inspector can fully inspect a 2500 square foot home in less than two hours. You want an inspector that is curious and meticulous.
Step 10: Make Any Corrections If Needed
Try to stay on top of things to ensure problems are handled before they cause major trouble. Make certain that you do not make any significant, out of the ordinary purchases and be available to your broker and loan officer throughout the process.
Step 11: The Settlement
Some home purchases fail but if you have followed the expertise of your realtor and home mortgage professional, at last, you are closing on your the home loan. Finally, the property is transferred on to your name and is at your disposal to use as you please! Get in there and start living life!