FHA Pre Approval Application Requirements Process
FHA Pre Approval Loan Application, applying, getting pre-qualification from a lender bank. FHA Mortgage Jacksonville, Duval, St. Augustine FL.
Many Florida home buyers today are often in search of a limited down payment loan solution. The FHA mortgage still remains of the top choices for home buyers that have less than a 20% down payment.
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Understanding the FHA loan approval process is very important if you plan on getting an FHA home loan in the near future. The FHA is a government organization that insures residential mortgages made by lenders.
Their programs can be very helpful to prospective homeowners by offering limited down payments as low as 3.5% down. Here are the basics of the FHA loan approval process and how it works.
Where to Apply for your FHA Loan
In order to apply and start your FHA loan application, you will have to locate an approved FHA lender. The FHA does not actually write any loans and therefore, relies on regular banks and mortgage lenders to write the loans for them.
The government simply backs and insure these mortgages. This means that you should be able to find several FHA lenders in your area. Most banks work with the FHA in some capacity. We can certainly help Florida homebuyers, just call 800-743-7556.
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FHA Pre Approval Application and Pre-Qualification
The first step in the process is the pre-qualification or pre-approval process. This step involves you speaking with the lender about your situation and getting pre-qualified.
During this step, they will gather information about your housing history, job history, income, and liabilities. They will then give you a general idea of how much money you could be able to borrow.
The application process requires you to give them a great deal of personal information. They are going to want to know everything about you and your financial situation. You will give them your name, address, social security number, information about your debts, and anything else that they ask for.
Processing Mortgage
Once you apply for the loan and have a contract to purchase a home, the lender will then process your mortgage. The lender will update all necessary documentation at that time.
They will update your credit report, verify your income and your employment situation. They will look at all of the accounts that you have and your total debt. They will use debt-to-income ratios to determine if you meet their borrower guidelines.
During this step, they will determine if you pay your bills on time if you make enough money for the loan you are requesting, and a great deal of other information.
1. FHA Appraisal
The lender will then want to appraise the house and make sure that they can lend against it. They will dispatch an appraiser to go look at the house come up with a value.
2. FHA Underwriting
At this point, if everything looks good, they will send the loan to underwriting. This is like a final check to make sure that the loan is acceptable. Sometimes the lender will request additional documentation at this time.
3. FHA Closing
If everything goes well up to this point, they will then schedule a closing. You will attend the closing, sign several papers, and then the mortgage and sale of the house will be completed.
What is the maximum loan amount with FHA loans?
The limit is set on a county-by-county basis within each state. You can research limits in your specific area.
Each county has a list of four separate numbers; these provide limits for a single-family residence all the way through a quad-residence. If you are purchasing a home with more than four units, you will not qualify under the FHA home loan program.
What credit score do you need for an FHA loan approval?
In order for you to be approved for an FHA, most lenders require a min 640 credit score.
FHA loans are forgiving in terms of down payment and even income, but they do have min standards in terms of credit. If you do have a previous negative credit history, you may still qualify as long as:
- Defaults and bankruptcies are more than 3 years old, and
- Foreclosures are more than five years old, and
- You do not owe the government any past-due money, including late taxes, OR
- Your score suffered from a one-time, negative problem that has since been resolved.
FHA Mortgage Source is Florida’s leading FHA loan resource, serving you 7 days a week. Please call us today to learn more.
I Am Pre-Approved for an FHA Loan But…
Here’s a mortgage question we received recently: “We have been pre-qualified for a regular FHA loan but we’d like to get qualified for a 203K loan so that we can look at ‘fixers’ that might be more in our budget. Can we do that?”
Switching from a standard FHA loan into an FHA 203k is possible, and happens on a fairly regular basis. In fact, it can be a real deal-saver when the home you want won’t pass an FHA inspection.
If you’re pre-approved for an FHA loan and the house fails the inspection, your traditional choice is to either move onto another house or require the seller to make the necessary repairs to pass the FHA inspection.
With the FHA 203k, you don’t have to go that route. you can close on the home, and finance the repairs right into the mortgage, passing the inspection post-closing.
The FHA 203k also allows a home buyer to purchase a fixer-upper more in line with their budget, pay for the renovations and roll the costs into the mortgage. This makes more expensive repairs more affordable since they get amortized into the mortgage.
Here’s a scenario to help tell the story. John and Nancy want to buy their first home together. Their budget and mortgage pre-approval tells them they can afford a $90,000 home.
Most of the houses in that price range in their neighborhood are pretty average and don’t really catch their eye. However, one home they found listed for $74,000 had some real potential. Putting $10,000 into a kitchen remodel and another $5,000 in various improvements like paint and carpet, this home would be perfect for them.
Unfortunately, Nancy and John don’t have $15,000 to pay for the renovations. Plus, they’re not builders, and they’re busy so working on the house themselves is going to be tough.
Instead of settling for the mediocre homes for $90,000, trying to find ways to nickel and dime the remodeling projects, or putting it on expensive credit cards and store credit, John and Nancy can roll the cost of a professional contractor to do the work for them right into the mortgage.
And it’s not that much more per month. For every $1,000 financed, they add about $6 to their monthly house payment. In other words, financing the $15,000 in remodeling they want will cost about $45 on their mortgage payment.
Now, take into account that because the home needed fixing up, it was likely priced relatively low. It may have been listed for much less than nearby houses would be worth. So any fixing up helps increase the value.
John and Nancy could have been looking in a neighborhood where home values are closer to $110,000. With the $74,000 home price and the $15,000 in renovations, they’ve purchased a $110,000 home for $89,000. That’s $11,000 in instant equity. Not bad for buying your first home.
Here’s a shortlist of examples of FHA 203k projects you could do in your home:
- New Roof: Whether it’s just shingles or the wood underneath, you can cover roof work costs with a 203k mortgage loan.
- Gutters: Gutters keep water out of your roof, walls, and basement. Yes, gutters fall under the 203k umbrella.
- New Windows: Whether it’s the style or concern for energy efficiency, it’s easy to see the benefits of rolling the costs into an FHA 203k.
- New Door: That front door looks old and in bad shape. You could replace it with a more solid door, or a decorative one.
- Paint: This paint is peeling and chipping, and could be old enough to have lead in it. Inside and outside painting can be rolled into the FHA 203k mortgage.
- New Siding: Maybe you’d prefer aluminum or vinyl instead of this wood siding. Maybe there are holes in it. Whatever the reason, paying a contractor to replace the siding is another option.
- Handrail or Deck for the Front Door: A simple handrail would help for the required work when it comes to an FHA mortgage, but wouldn’t a nice deck make the front of the house look great and add value? The 203k covers decks and patios.
So yes, if you’ve been approved for an FHA loan but you want to buy a fixer-upper, you could very well switch to an FHA 203k loan. Talk to a mortgage consultant about the idea. Enjoy the new home!
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