How to Get Preapproved for an FHA Loan
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If you’re looking to get preapproved for an FHA loan, you’ll need to provide a few key pieces of information. In this article, we’ll walk you through the process and provide everything you need to know.
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What is an FHA loan?
An FHA loan is a type of mortgage loan that is insured by the Federal Housing Administration (FHA). borrowers with FHA loans pay for mortgage insurance, which protects the lender from loss if the borrower defaults on the loan. Because of this mortgage insurance, lenders are often more willing to approve an FHA loan than a conventional mortgage.
Conventional mortgages are not insured by the government and may have higher interest rates than FHA loans. If you are not sure whether an FHA loan is right for you, or if you have questions about getting preapproved, talk to a HUD-approved housing counselor.
How to get preapproved for an FHA loan
The Federal Housing Administration (FHA) loan is a great option for first-time homebuyers or anyone who doesn’t have 20% to put down on a home. An FHA loan allows you to buy a home with as little as 3.5% down. If you have a credit score of 580 or above you can qualify for an FHA loan with a 3.5% down payment. If you have a credit score below 580, you will need to put down 10%.
Pull your credit report and scores
The first step in getting preapproved for an FHA loan is to get your credit report and scores. You can get your report and scores from the three major credit reporting agencies – Experian, Equifax and TransUnion – or from a reputable credit monitoring service.
A credit score of 580 or above will qualify you for a low down payment of just 3.5%, while a score of 500-579 will still enable you to qualify, but with a higher down payment of 10%. To get your scores, simply order them from one or all of the credit reporting agencies or from a credit monitoring service.
Shop around for lenders
One of the best ways to get preapproved for an FHA loan is to shop around for lenders. Mortgage lenders offer a variety of loan products, and each has its own set of qualification standards. Furthermore, some lenders are more willing to work with borrowers who have weaker credit profiles. As such, it’s important that you compare rates and terms from a variety of lenders before you commit to a particular mortgage product.
Compare interest rates and fees
The interest rate is important, but you also need to focus on the fees. Some lenders charge origination points, which are a type of fee that covers the cost of originating the loan. You might also have to pay for things like appraisal fees and title insurance. When you’re comparing interest rates and fees, make sure you’re comparing apples to apples. In other words, make sure you’re comparing loans with the same terms.
Find the right loan program
The best way to get preapproved for an FHA loan is to use a lender that is approved to make FHA loans. You can get a list of these lenders from the Department of Housing and Urban Development (HUD) or from the Federal Housing Administration (FHA) website.
Once you have a list of approved lenders, you can compare their loan programs to find the one that best meets your needs. Some things you may want to consider include the interest rate, the length of the loan, and the down payment requirement.
Once you have found the right loan program, you will need to fill out an application and submit it to the lender. The lender will then review your application and determine if you are preapproved for an FHA loan.
Get preapproved
To get preapproved for an FHA loan, you’ll need to provide the lender with a variety of financial documents.
The lender will need to see bank statements, tax returns and W-2s or 1099s going back at least two years.
You’ll also need to provide a complete list of your debts including credit cards, student loans, auto loans and any other outstanding obligations.
The lender will use this information to create a debt-to-income ratio which is one factor they’ll use to determine if you’re eligible for an FHA loan.
