Step-By-Step Guide to the FHA Home Loan Process
So you’re growing your family, or you’re tired of wasting money on rent. Or you’re just tired of city life and ready to move to the suburbs. The thought crosses your mind of buying a home, but that’s a long, difficult process… right?
It is and it can be, there’s no way to make the process easier, but this list will walk you through the FHA home loan process and make it a lot less nerve-wracking. Here are the 5 steps explained so you can confidently move on with this process.
You’ll need to find out your current credit score/history. Gather your documents (tax returns, employment, etc.) Contact a HUD-approved lender and consult with them. Get a pre-approval letter which will state what you might be able to borrow given your financial status doesn’t change.
The pre-approval process is not technically 100% necessary. However, it gives you an idea of what price range you should look at as well as letting sellers know you’re serious. If you want to place a bid on a house, the seller can accept it knowing that you will likely be approved.
Standard Loan Application
Soon you’ll have to fill out a Uniform Residential Loan Application. It’s usually done after you’ve found a house because it asks for things like the property address and type of loan.
This is a long process because it will ask extensive questions about your employment history, other forms of income, and recurring debts.
This is important to the lender because they need to find out how much your property will be worth in the event they need to sell it due to foreclosure.
They will want to hire an appraiser to establish the fair market value, as well as make sure it meets HUD’s property requirements. As long as it appraises for the amount you’ve agreed to pay or more, you’ll move on to the next step.
Underwriting and Documentation Review
The moment of truth! This is the step that many get anxious about as the underwriter will look carefully at your paperwork. If there are minor issues, you just may need to provide a letter of explanation.
Unfortunately, if there are serious issues with your application, paperwork, credit history, or employment, this will likely be the end of the line. Let’s hope you move through this step of the home loan process quickly.
FHA Loan Approval
At this stage, you have been approved for your loan! The lender “closes” the deal by having everything signed and you double check for accuracy. You also need a check to cover all closing costs and fees.
Property ownership will be transferred from the seller to you and you will become the proud owner of your new home!
Although the loan process can be scary, breaking it down into these steps should ease your mind. The hardest part to get through is the underwriting and once you do, it will be smooth sailing. To get more information on the FHA home loan process, check out our blog.