March 29, 2022
How do you know you are ready to apply for an FHA home loan? And by that question, we mean sending the documents to the lender ready for the approval process.
Being ready to submit your financial information and other documents for loan approval means having taken certain steps along the way in the planning and saving stages of your mortgage.
To apply for an FHA home loan, you’ll want the following things in the list below, and keep in mind that these are needed before you send in your application:
- A home to make an offer on
- A down payment or sources for a down payment
- Any required gift letters for down payment or closing cost assistance provided to you
- Tax documents from the last two years
- A complete understanding of what is in your credit report
Making an offer on a home and having it accepted is the catalyst for getting the actual application paperwork into the system, but some borrowers pre-qualify for a loan before house hunting.
That causes some confusion at times because it’s easy to assume a prequalification is the same thing as loan approval. It’s not necessarily true and you should never assume the loan is fully approved until your lender tells you it has been. Prequalification is a preliminary step.
There are other issues to consider, too.
If you do not know what is in your credit report, you are not ready to apply for a mortgage. If your loan officer sees things in your report including outdated information, identity theft, or inaccuracies in the report?
Your home loan could be delayed until those issues are sorted out to the lender’s satisfaction. Filing disputes with credit reporting agencies can take time, and you may have to dispute the same information with each of the “big three” credit reporting agencies individually.
It pays to look at your credit reports regularly as early in the home loan journey as you can.
You are also not yet ready to apply for a home loan if you do not have gift letters from anyone contributing funds toward your down payment or closing costs. A gift letter is required in such cases and your loan can’t move forward without them if they are required.
Your down payment itself is crucial and not for just the usual reasons. If you have down payment money that has not been documented as to the source similar to gift funds, your lender will require verification that those funds did not come from cash advances, payday loans, or other non-collateralized lending products.
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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