There are sometimes questions about the nature of FHA loan application requirements. Some feel that the loan requirements are “intrusive” or are asking for too much personal data. Part of this sentiment comes from a lack of understanding of what the lender is required to do and provide under the rules of the FHA loan program.
What does the FHA require of the lender in order to get a loan approved? Keeping in mind that a home loan is a major line of credit, it’s not surprising that the rules for income and employment verification, credit history and other things are more stringent than for smaller lines of credit like a credit card or cell phone account.
For starters, the FHA requires all documentation to be current or at the very least, very recent. According to FHA loan rules found in HUD 4155.1, “Lenders must obtain the most recent documents required to perform the mortgage credit analysis. ‘Most recent’ refers to the most recent document available at the time the loan application is made.”
Furthermore, there’s a list of documentation required by FHA loan rules. The lender must obtain the following:
• evidence of Social Security Number
• verification of deposit
• verification of employment (VOE)
• alternative employment documentation
• TOTAL Scorecard Accept/Approve and Refer feedback for employment verification
• federal income tax returns
Employment verification may include W2s, pay stubs, and other documents. The lender is also required to get copies of bank statements, including deposit amounts and other relevant details as may pertain to the sources of down payment funds and earnest money.
Borrowers may be asked to sign releases or statements permitting the lender to obtain credit and employment data–this is common. Borrowers should NOT be asked to sign blank documents–this is something you should contact the FHA directly to discuss if it is asked of you.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.