January 4, 2018
What do I need to know about applying for an FHA mortgage? The answers to this question can help any potential home loan applicant go into the process better prepared and ready to begin the journey toward home ownership.
Preparing For An FHA Mortgage Loan Takes Time
The average preparation time for an FHA loan can be up to a year or more, depending on the borrower. Why does it take so long to plan for an FHA loan?
Part of the prep time involves saving up for the fees and expenses of the loan including appraisals, compliance inspection fees, and the required minimum down payment.
Borrowers should expect to pay a minimum of 3.5% of the adjusted value of the home as a down payment; this is required above and beyond any other fees or expenses associated with your loan.
Pulling Your Credit Report
Depending on what you find in your credit report in terms of errors, evidence of identity theft, or other problems, you may require additional time to sort out issues related to the information in these reports. If you are the victim of identity theft, you will need time to file police reports, follow up on investigations by your credit agency’s fraud department, etc.
You also want to pull your credit report to see what your lender will see in terms of your record of on-time payments. If you have “lates” or missed payment information in your credit record, you will want to make sure you have a full 12 months of on-time payments prior to filling out a home loan application.
FHA Home Loans Require Documentation
All lenders will be required to verify your income, employment, and the likelihood that your income will continue.
The lender is also tasked with making sure the sources of all your down payment funds is acceptable and that your down payment is not coming from payday loans, credit card cash advances, “gift” funds with an expectation of repayment, etc.
If your lender has difficulty verifying these things, the timeline for your home loan may grow longer. It’s best to prepare in advance for this verification process-you will need to provide contact information, bank records, and other supporting documentation as part of this process. Do you have this information in one place? If not, you’ll have some work to do in order to move the home loan application forward.
Some borrowers don’t anticipate these issues or expect that there could be delays; depending on your circumstances you may feel pressed for time trying to close the deal on a home, but it’s best to approach any major line of credit knowing that the process will take time and may require extra information, time, and money to finish properly.
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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