Understanding the Basics of FHA Loans
A Federal Housing Administration (FHA) loan is a mortgage insured by the FHA, designed for lower-income borrowers. The main advantage of an FHA loan is that it allows borrowers to purchase a home with a smaller down payment than conventional loans. It also allows home buyers to use gifts from family members or employers to cover part or all of their down payment and closing costs.
Finding an FHA-Approved Lender
Before applying for an FHA loan, it’s important to find an FHA-approved lender. The Department of Housing and Urban Development (HUD) maintains a list of approved lenders on its website. Borrowers can also search for lenders using HUD’s Lender List Search tool.
Getting Pre-Approved for the Loan
Once you’ve found an approved lender, you’ll need to get pre-approved for the loan. This involves submitting your financial information, such as your income, assets, and debts, to the lender. The lender will then review your information and issue a pre-approval letter indicating how much they are willing to lend you.
Finding a Home and Making an Offer
Once you’ve been pre-approved for an FHA loan, you can start looking for homes within your budget. When you find a home you like, make an offer on it. Your real estate agent can help guide you through this process.
Submitting Your Loan Application
After making an offer on a home, you’ll need to submit your loan application. This involves providing your lender with additional documents such as pay stubs, tax returns, bank statements, and proof of insurance. Your lender will then review your application and issue a final approval.
Closing on the Loan
Once your loan has been approved, you’ll need to sign all the paperwork required to close on the loan. You may also be required to pay closing costs such as title insurance and appraisal fees at this time. Once all the paperwork has been signed and all fees have been paid, the loan will be funded and you can move into your new home.