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How to Qualify for an FHA Loan
When it comes time to qualify for an FHA loan, most people are surprised at how easy the process is. In fact, the guidelines for a loan such as this are extremely flexible and in most cases, a down payment of less than 5% would be accepted. Because of this, many people can become homeowners with an FHA loan that might not be qualified with another option. This is also an excellent option for first time home buyers that don’t have a large deposit to put down on a home.
To qualify for an FHA loan, there are basic guidelines set forth by the federal government that include:
• Steady employment of two years, preferably with the same company
• Two years of income at the same level or more
• Minimum credit report score of 620
• Bankruptcy should be two years old or more
• Foreclosures should be three years old or more and the borrower would need to have perfect credit from that time forward
• New FHA loan would have to have a monthly payment that is no more than 30% of the person’s gross income
Of course, to quality for an FHA loan, these basic guidelines would be followed but each buyer has a unique situation so working with a reputable lender is imperative. That way, the lender would be able to answer questions and provide options that might otherwise be overlooked. The primary goal when it comes to qualifying for an FHA loan is to help people with low down payments or past bad credit to become homeowners.
The most important aspect of going with an FHA loan has to do with documentation. To qualify for an FHA loan, the individual would have to provide the right documentation. This includes your most recent two years tax returns (including all schedules), your last two years W2s and 1099s, and your last month’s worth of pay stubs. If you are self employed, you will actually need your last three years tax returns as well as a Year-to-Date Profit and Loss statement.
In addition to your tax and payment records, you will also need to provide three months worth of bank statements for all of your account. If you have retirement accounts, such as a 401k, mutual fund, stocks or money market, you will need to provide the most recent statement from all of these accounts as well.
In order to ensure your credit satisfies the requirements for the FHA loan, you will need to supply the most recent statements from your bills. These must indicate the minimum payments and account numbers. If you rent, you must provide 12 months worth of cancelled rent checks as well as the contact information for your landlord. If you have no credit, you will simply need copies of your most recent utility bills. If you have a bankruptcy on your credit, a copy of your complete bankruptcy and discharge papers will be required.
These are just the basic qualifications and documents that you must provide. Keep in mind that each case is different and your lender may require more or less information in order to qualify you for an FHA loan.
It is really easier than you may think and the application takes about 10-15 minutes to complete with a loan decision in less than 24 hours in most cases.
2 Responses to “How to Qualify for an FHA loan”
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September 28th, 2009 at 1:01 pm
[...] Then, to apply for an FHA loan, the person needs to make sure he or she can afford the monthly payment. To accomplish this, the borrower should have gone through the calculations of their debt versus income ratio to see exactly how much home can be purchased on their income and in relationship to their current bills. The borrower should also start saving money months in advance so that some amount of down payment can be applied to the loan when the home is purchased. This would show the lender that the person has the ability to save as well, as bank statements from all of the borrower’s accounts are required to qualify for an FHA loan. [...]
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