What Do You Need to Qualify for an FHA Loan With a Co-signer?
An FHA mortgage loan is a debt incurred to finance the purchase or refinance of a personal residence. This mortgage program is underwritten by the Federal Housing Administration. This program is popular for its low down payment requirements and lower credit score requirements than the traditional Fannie Mae or Freddie Mac mortgage loan. It should be noted, there are typically higher closing costs due to the more risky nature of the loan itself. If a borrower lacks the credit and down payment requirements to qualify for the loan himself, he can have a co-signer on the loan to ensure that the mortgage closes.
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Documentation
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For all borrowers listed on the mortgage, copies of pay stubs, tax returns, bank statements and credit history will be required. Additionally, other documents -- including divorce decrees, leases, and other loan documentation -- may be required. A driver’s license or state-issued identification will be required for all borrowers listed on the loan as well. If either borrower receives Social Security payments, a copy of the Social Security reward letter will be required as well.
Financial and Ratio Requirements
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Each financial institution has different guidelines and lending practices, however, most require a minimum credit score of 620 for all borrowers on an FHA loan. Additionally, if any tax liens or judgments are listed on the credit report, they must be paid in full prior to the loan closing. A minimum down payment for most lending institutions on an FHA mortgage ranges between 3.5 and 5 percent. Documentation of the funds must be provided prior to closing as well. If the down-payment funds are a gift from a nonsigning individual, bank statements of that individual may be required as well.
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Qualification Process
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In order to qualify for an FHA mortgage, all borrowers on the loan must fill out a Universal Residential Loan Application. Each borrower must list his full legal name, date of birth, Social Security number, current address and employer’s address. Additional information -- such as income, debt, and property owned -- will be gathered through both the application and the supporting documents. Once a complete application plus supporting documentation is gathered, the loan goes to underwriting and the financial institution decides if it is going to approve the mortgage.
Good Faith Estimate and Truth in Lending Statements
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Arguably, the two most important documents in a mortgage closing are the Good Faith Estimate and the Truth in Lending Statement. The Good Faith Estimate outlines each expense incurred in the closing of the mortgage. It is a good reference for comparing two different mortgage offers. Additionally, the Truth in Lending Statement lists the total cost of the mortgage over the life of a loan, from the closing costs to the total interest paid over the life of the debt.
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