FHA, which is the acronym for the Federal Housing Administration, is a federal government agency that provides insurance for private mortgage loans, whether for new homes or older homes. Established in 1934 by Congress, FHA loans eventually became a part of HUD or the Department of Housing and Urban Development in 1965. For people wanting to apply for an FHA loan, this entity's goal is to help secure money needed through standard lenders by providing methods of reducing risk.
People that want to take advantage of FHA loans when buying a home can make the process easier and less stressful by having a better understanding of what the process involves. The steps to apply for an FHA loan are actually simple. Today, homebuyers can choose to work with a brick and mortar lender or for added ease, a company that provides an online application process.
As long as all of the required documents are available, the lender should be able to provide an answer to the borrower quickly. To apply for an FHA loan, the borrower would sit down with a loan officer at which time the application and documentation would be reviewed. Based on the information provided, the loan would be approved or denied. One of the best things a borrower could do is to work with a highly qualified lender, especially if there are challenges such as having less than perfect credit or a low down payment.
Regarding the steps to apply for an FHA loan, the borrower should come prepared with specific documentation to include contact information for his or her employer, proof of gross salary for the past two years, bank account statements for the past six months, and W2s, as well as income tax forms for the past two years. With this information, the lender would then go through a process of verifying the information.
Now, to apply for an FHA loan as a veteran, the borrower would need to provide additional documentation such as DD Form 214, which is the person's official discharge paper from any of the Armed Forces.
At the end of the application process, you have not completely secured the FHA loan. However, you will be pre-approved for a certain amount. This is the amount that you could spend on a home. However, keep in mind that this pre-approval number is not always set in stone, but can be used as a guideline when shopping for homes. Having this pre-approval can assist you once you have found a home that you would like to purchase and make an offer on. Sellers are typically much more comfortable working with an individual that has already been pre-approved to purchase a home by a lender. Once you have made an offer on the home, an appraisal will be issued on the home and barring any unforeseen circumstances, your FHA loan will be approved.
The key to moving through the application process quickly is being prepared when you meet with the lender and working with an FHA-approved lender.
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