January 16, 2020
Do you need to apply for a home loan to buy real estate in 2020? FHA mortgages feature a low minimum down payment, allow seller contributions to closing costs, and even permit down payment assistance from approved sources.
What does it take to apply for an FHA mortgage? You will need proof of income, tax records, and bank statements.
Borrowers also need to have a credit history of some kind, even if non-traditional. FHA loan rules allow non-traditional credit, but lender standards will be very important.
FHA Loan Approval Requirements
FICO scores between 500 and 579 for a 10% down payment, or FICO scores at 580 or higher for the lowest down payment of 3.5%.
You will also need 24 months of employment history as a general rule, and you should come to the home loan application process with no late or missed payments for at least one year.
This short list (it is not complete) is a little more complex that it may seem at first–the FICO scores are FHA standards only. Lender standards may be more strict, and this is permitted under FHA Loan rules.
Some kinds of home loan are not available from some lenders; one lender offers mobile home loans and another does not. The same may be true of FHA construction loans, rehab loans, or any other FHA loan product.
Most realtors recommend a house hunter look into getting pre-approved for a mortgage which helps sellers take you seriously and helps you shop for a home with confidence.
An FHA Loan application can be denied if you don’t have enough work experience or if you come to the process with FICO scores that do not meet FHA minimums. The appraisal process for the home may also reveal issues that may complicate the loan including corrections for a house that is not up to state code or FHA standards.
A house that is appraised but requires corrections can still be approved for a mortgage loan, but the corrections would be required as a condition of loan approval.
Choosing the right kind of mortgage loan for you is also key; borrowers who want an adjustable rate mortgage (ARM loan), for example, but plan to stay in the home long-term may not realize the implications of the Adjustable Rate Mortgage (ARM).
Do you have a specific motivation for applying for an ARM loan? Why are you applying for it? A fixed rate mortgage is better for those who plan to keep paying on the mortgage long-term, but an adjustable rate loan can cost you more money the longer the loan goes.
Ask an experienced home owner or a lender about ARMs versus fixed-rate mortgages and learn more about this important issue before you commit.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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