How to Apply for an FHA Loan

FHA, otherwise known as Federal Housing Administration, is the largest mortgage insurer in the world which provides lenders with protection against mortgage defaults. FHA was created to make home ownership available and affordable for low to moderate income families. FHA loans only require a 3% down payment which makes them a very attractive alternative for homeowners. They also can be used in conjunction with State bonds and grants. Another benefit is that they do not allow a lender to charge for unnecessary fees.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Bank Statements
• Pay Stubs
• W2's and/or Tax Returns
• Driver's License and/or Permanent Resident Alien Card

Necessary Documentation

1. Gather together the most recent two months of bank statements, pay stubs and any other assets you may have including pension plans. You must have a valid social security number, driver's license and/or a valid and up-to-date Permanent Resident Alien card, if applicable. Your lender will need to make copies of these.

2. You will need at least two years of W2's and may even be required to submit income tax returns. If you do not have these available, contact your local IRS office who can mail you transcripts of these documents.

3. If applicable, have divorces papers, settlement agreements and child support orders ready. The lender will require copies of all of these documents, which are needed to calculate your debt to income ratio.

4. Although excellent credit is not a mandatory factor of an FHA loan, it is still wise to make any credit repairs in advance to applying for an FHA loan. This will help the accelerate the process.

5. When you have gathered all of this documentation, you are ready to apply for an FHA loan with an FHA approved lender.

Tips & Warnings

• If you know of anything that is going to be questioned, prepare a Letter of Explanation for the lender. Things such as unemployment for more than two months require an Letter of Explanation.
• Be very accurate on your loan application since this is checked against information obtained on your credit report. If you have had multiple names, numerous addresses or previously owned homes, let the lender know in advance. You may be required to write Letters of Explanation. Many questionable things are found through examining a credit report.

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