FHA loans are solely controlled by the Federal Housing Administration. They offer a low-cost alternative to traditional mortgages because they insure the loans. Insuring the FHA loans allows the lenders more breathing room, as they have confidence in the event that the borrower defaults on their mortgage payments. The Federal Housing Administration doesn’t technically mortgage loans to homeowners, but they offer a level of insurance to the lenders.
There are many benefits in choosing an FHA loan. Less cash is required when using an FHA loan, so if you are strapped for cash, this can be your best option. They are also very lenient when it comes to their payment cycle or schedule. They offer more freedom to the homeowner, making this type of loan attractive to many. The FHA loan is perfect for you if you have a good credit rating, but don’t seem to have too much cash on the side.
Since the FHA loan insures the loans, they are much more attractive to lenders in comparison to their traditional mortgage loan counterparts. The FHA loan also doesn’t allow the lender to charge unnecessary fees to your loan. This is very important since these fees can add up. FHA loans typically offer a very low down payment ( lt; 5%), so it’s very attractive to homeowners.
What You Will Need. Keep in mind that these are required. If you don’t have one of these completed, you will be denied an FHA loan. Some of these are the bare minimum. The better credit standing you are in, the better the chances you will have at attaining this low-cost loan.
A Good Credit Rating. You may want to work on improving your credit rating before you apply for an FHA loan. This is crucial if you want to avoid being denied a loan. Employer’s Information (From the Past Two Years). You will need to provide your employer’s information as you apply for an FHA loan.
This is crucial as the lender and the insurer (the Federal Housing Administration) will want to know that you are able to provide the lender with the mortgage payments on time. The main purpose behind this is to make sure that you have adequate income to fulfill the mortgage payment requirements. You will need to provide the employer’s names and addresses as you complete this requirement. W-2 Tax Forms (From the Past Two Years). This is just to make sure that you are in good standing in terms of taxes. This also provides the lenders and insurers some very important information about your financial standings and financial situation. You will need it for the past two years since they want to make sure that your financial situation is stable, and doesn’t fluctuate yearly. Some figures look good on paper, but if they aren’t stable from year-to-year, there is a higher chance that you may default on a loan. IRS Tax Returns. Basically, they are required for the same reasons you may need a W-2 Form. It is used to get a better understanding of your current financial standings. The lender and insurer will want to make sure that you won’t default on your payments! Recent Bank Statements. To get a better understanding of your most recent financial periods. Pay Stubs. To look at your recent spending, and to make sure that you are able to pay off the loan in the allotted time. Valid Social Security Number, Driver’s License, and/or Permanent Residence Alien Card. Just to check and clarify the identity of the homeowner.
Divorce Papers or Child Support Orders. Just to get a better picture of your current financial situations.
You will need to gather these together and apply for the FHA loan. FHA loans allow individuals who previously wouldn’t have a chance at a traditional loan to have the opportunity to own a home. The FHA loan can save you lots of money, so make sure that you have all these available for the approved FHA loan lender.