How to Get FHA Financing
An FHA loan is attractive to prospective homeowners because of the easy qualifying criteria. Conventional home loans require large down payments and strict credit requirements. FHA loans allow homeowners to take advantage of home ownership with a reduce down payment and relaxed credit requirements. Before applying for an FHA loan, understand the requirements and process to ensure it's the right loan for your situation.
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Instructions
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Meet the minimum FHA financing requirements. FHA loan applicants must have a solid employment history. Steady employment for two years is required. Working for the same employer or industry during this time is typically necessary. FHA programs require a credit score of at least 620.
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Secure a down payment. FHA down payment requirements are lenient. The program does, however, require at least a 3.5 percent down payment. For example, a home value of $150,000 would require a payment of $5,250 or higher.
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Find a lender who offers FHA loans. The U.S. Department of Housing and Urban Development, which backs FHA loans, can assist in finding a local lender. Contact the lender and complete a loan application.
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Meet the lender’s documentation requests. After taking the application, the lender will request supporting documentation. This documentation may include tax returns, pay stubs and financial statements. The lender will also need to pull a credit score. Your Social Security number will be required for this to happen.
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Sign FHA loan documents. The lender will process the loan and schedule a date to sign documents. In most cases, the loan will come through no later than three business days after the documents are signed. Review the materials carefully to ensure the loan terms are correct.
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Tips & Warnings
Down payments less than 20 percent of the home value may be subject to private mortgage insurance (PMI). With this insurance, the borrower is required to purchase a policy that protects the lender in the event of loan default. PMI cost is based on the value of the home and can be hundreds of dollars in some cases.
FHA guidelines prevent some borrowers from taking advantage of this program. Borrowers with bankruptcy less than two years old can’t qualify. A foreclosure that is less than three years old will also prevent a borrower from securing this financing.
