April 26, 2023
What is the difference between FHA loan approval and pre-approval for an FHA mortgage? Some borrowers get confused during the initial process because it’s easy to assume that getting through pre-approval means you’ve been fully approved for the mortgage.
The reality is that pre-approval is a tool for the borrower and the lender to determine if you’re ready to buy based on your income, debt-to-income ratio levels, the amount of down payment you have saved, etc.
It’s the start of the loan process, but it is not a guarantee that you have an FHA mortgage loan yet.
Getting pre-approved for an FHA mortgage means using an online mortgage loan calculator or other tool to add up your income, debts, interest rate, etc.
The price of the home or an estimated price based on what you believe you can afford are also part of these calculations.
Questions To Ask In The Pre-Approval Process
Pre-approval involves submitting that data online or via a lender and checking the results against the bank’s minimum and FHA standards.
Do you have good FICO scores? Is your debt-to-income ratio reasonable? How much do you have saved for the FHA minimum required down payment? The answers will determine a lot about your readiness to purchase a home.
For example, borrowers who have no money for a down payment may need to take time to budget and save up for one.
The same goes for those who cannot bring 12 months of on-time payment for all financial commitments to the FHA loan application process. You may need to wait to apply for a loan until you have 12 solid months of on-time payments on your credit record.
Other Basic Questions To Ask Yourself About The FHA Loan You Need
Do you know how much home loan you would like to apply for? What’s the basic price range of the home you are looking for?
Do you know how much you may need to pay for any required flood insurance or related natural disaster insurance for a home located within a flood plain or another area prone to certain natural disasters?
These are common issues–borrowers at the start of their house-hunting journey might not think of them at first, but once you get the planning stages underway for an FHA mortgage, it helps to consider things like these.
If you aren’t sure about your home loan options based on needing answers to one or more of these questions, it’s best to get those answers before getting pre-approved for an FHA mortgage loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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