The Complete Process of Getting an FHA Loan

FHA loans can help you get a mortgage despite poor credit and minimal savings. To get an FHA loan, check to see if you’re eligible, compare FHA-approved lenders and complete a loan application.

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If youre concerned that bad credit or trouble saving for a home down payment might prevent you from buying a home, an FHA loan could be the solution. FHA loans are insured by the federal government and often easier to get than conventional mortgages.

FHA loans are insured by the Federal Housing Administration and issued through approved mortgage lenders, including credit unions, banks and direct lenders. Because FHA loans are federally guaranteed, lenders are more willing to offer loans to borrowers with less-than-perfect credit. Heres how to apply for an FHA loan.

Getting an FHA loan to buy your first home can be an exciting yet confusing process, especially if you’re not familiar with all the steps involved. As someone who just went through this myself, I want to walk you through the full process of getting an FHA loan so you know exactly what to expect

What is an FHA Loan?

First things first – what even is an FHA loan? FHA stands for Federal Housing Administration, which is a government agency that insures certain types of mortgages. This insurance protects the lender if the borrower defaults so lenders are able to offer FHA loans with lower interest rates and down payments.

The two key benefits of FHA loans are:

  • Low Down Payments – You can get an FHA loan with just 3.5% down

  • Lenient Credit Requirements – You can qualify with a credit score as low as 500

This makes them ideal for first-time and lower-income homebuyers who may not have a lot saved up for a down payment or have less-than-perfect credit.

Step 1: Get Pre-Approved

The first step is getting pre-approved for an FHA loan. This involves applying with a lender and going through an initial financial review to determine the loan amount you qualify for.

Here’s what you’ll need to provide to get pre-approved:

  • Credit report and scores
  • Income documentation (W-2s, pay stubs, tax returns)
  • Debt information (credit card payments, student loans, car loans, etc)
  • Down payment funds and source

The pre-approval process is quick and easy these days. I applied online in about 10 minutes and got my pre-approval letter the same day. This letter shows sellers you’re a serious buyer and gets you ahead of other potential offers.

Step 2: Find a Home and Make an Offer

With your pre-approval letter in hand, you’re ready to start home shopping! Working with a real estate agent can help you find listings in your price range and submit competitive offers.

As an FHA buyer, remember there are certain requirements the home must meet for the loan, including:

  • Primary residence only
  • Minimum 580 credit score for 3.5% down
  • Federally set loan limits based on local home prices
  • Property must pass FHA appraisal

Once you find the perfect place, your agent will help you submit an offer and negotiate a purchase price with the sellers.

Step 3: FHA Appraisal

After getting your offer accepted, your lender will order an FHA appraisal. This is a required inspection done by an FHA appraiser to ensure the home is in good condition and meets safety standards.

Some things the appraiser looks for:

  • Structural integrity
  • Modern electrical and plumbing systems
  • No lead paint or exposed wiring
  • Good roof condition
  • No severe mold or water damage

The appraised value cannot come in lower than your purchase price, so this is an important contingency before closing. If issues are found, you can ask the seller to make repairs or negotiate a lower price.

Step 4: Get Final Loan Approval

Following the appraisal, your lender will verify all your information and give you final loan approval. This involves:

  • Requesting loan documents and disclosures for you to sign
  • Ordering home inspection and title work
  • Confirming employment and income
  • Checking credit again to make sure nothing major changed

As long as everything still checks out, you’ll get a clear to close and can head to settlement!

Step 5: FHA Settlement/Closing

Congratulations – closing day is here! This is when you’ll sign the remaining paperwork, hand over your down payment, and get the keys.

Some key things that happen at an FHA closing:

  • Final walkthrough of the home
  • Sign loan documents and note
  • Pay your down payment and closing costs
  • Receive Closing Disclosure outlining all costs
  • Sign over deed and become the owner!

Closing costs typically run between 2-5% of the total purchase price. FHA allows the seller to cover up to 6% of costs to help you out.

Step 6: FHA Mortgage Insurance

One unique requirement of FHA loans is paying mortgage insurance premiums. This provides insurance for the lender and protects your investment.

You’ll pay two mortgage insurance premiums:

Upfront MIP – 1.75% of loan amount, paid at closing

Annual MIP – 0.45% to 1.05% of loan amount, paid monthly

On loans over 15 years, annual MIP drops off after 11 years if you put down over 10%. On 30-year loans, MIP lasts for the full loan term.

You’re Officially a Homeowner!

Following all these steps, you’ll complete the journey from loan application to keys in your hand! Owning your own place is an amazing accomplishment. Now it’s time to make it your own.

Find FHA-Approved Lenders

FHA lenders can set their own interest rates; some offer better terms than others. To find the lowest interest rates and fees, compare offers from several lenders. Use the HUD lender directory to find FHA-approved lenders and get their eligibility criteria.

How to Apply for an FHA Loan

To apply for an FHA loan, follow these steps.

How To Buy Your First House With An FHA Loan *Step By Step Breakdown*

What is a FHA loan and how does it work?

The FHA loan is a popular mortgage program backed by the Federal Housing Administration. It caters especially to those who might find it challenging to qualify for a traditional mortgage. The FHA loan offers lenient credit requirements and a low down payment.

How do I get an FHA loan?

To get an FHA loan, the first step is to find an FHA-approved lender and get pre-approved for your mortgage amount based on your financial situation. The process of getting an FHA loan also includes this requirement.

What are the requirements for getting an FHA loan?

To qualify for an FHA loan, you must meet several requirements, including: The property must be your primary residence. You must have a minimum credit score of 500 (though most lenders require a score of 580 or higher).

What is a Federal Housing Administration (FHA) loan?

A Federal Housing Administration (FHA) loan is a home mortgage insured by the government and issued by a bank or other lender approved by the agency. FHA loans require a lower minimum down payment than many conventional loans_, and applicants may have lower credit scores than is usually required.

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