January 25, 2023
Are you ready for an FHA mortgage loan? Buying or refinancing a home with an FHA loan takes planning and preparation, but once you’ve put the time in and gather your information, budget for expenses, and check your credit, the process will be far more understandable and accessible.
Are You Ready For An FHA Mortgage Loan Application?
You may be ready to fill out your FHA mortgage loan or refinance loan application if you have spent the last year reviewing your credit reports, working on reducing your debt-to-income ratio, and have made sure to have 12 months of on-time payments on ALL financial responsibilities.
You are ready to apply if you know what kind of home loan you need and how it will be used. For example, are you interested in buying an existing construction home or having one built for you using an FHA One-Time Close construction loan?
If you aren’t sure about this basic issue, you may not be ready to apply just yet.
FHA Loan Down Payment Requirements
Are you able to make your down payment? Do you have a rough idea of what that down payment might be? If not, you may not be ready to fill out the application paperwork just yet. Knowing your down payment (estimated) requires knowing what your budget for a new home might be, which leads us to the next topic.
How Much FHA Loan Can You Afford?
To estimate how much you will have to save up for a down payment, you will need to know the estimated price of the home. FHA Loan down payments are a minimum of 3.5% of the adjusted price of the property.
That means you will need to determine how much loan you need and do the math based on 3.5% of that estimated value of the home.
You can use an online mortgage calculator to help you arrive at a rough estimate of the loan you can afford based on the percentage of your down payment, income, and other factors. Online calculators can also help you estimate a monthly mortgage payment on the range of house prices you are looking at.
What’s Your Credit Score?
If you don’t have an answer to the question, “What’s your credit score?” you aren’t ready to fill out loan application paperwork yet. You should know the contents of your credit report including scores long before you submit your information to a participating FHA lender.
Knowing your credit report brings you a great deal closer to being ready to apply for an FHA loan or refinance loan; you can work on any problem areas you find in the time leading up to your application.
Trying to fix credit report issues including disputed information DURING the FHA loan application process is strongly discouraged. You should have such issues identified as early as possible in the loan planning stages.
Sometimes that isn’t possible if an issue comes up after you’ve applied, but for anything you can handle prior to speaking with a lender, it is best to address it long before committing to a lender.