One type of mortgage loan that’s particularly popular with first-time home buyers is an FHA loan. These loans are insured by the Federal Housing Administration and issued by FHA-approved lenders.
If you’ve decided that you want this type of loan, there are six steps you must follow in the FHA loan process:
Step 1: Start the Preapproval Process
While you are not required to be preapproved, it is highly recommended. Sellers may take you more seriously if you are pre-approved for a loan. It will also indicate how much you’ll be able to borrow, which dictates the price range of the homes you should look at.
Step 2: Complete the Loan Application
In most cases, you will fill out the Uniform Residential Loan Application after you’ve made an offer on the house. This application asks for information, including the type of loan you’re seeking and the address of the property you’re buying. Your history of employment, income sources and amounts, recurring debt, and other financial information are also required. It’s essential to fill out this application accurately and truthfully.
Step 3: Get the Property Appraised
Your lender will require that the house you want to purchase be appraised by an FHA-approved appraiser to assess its market value. The appraiser will walk through the home to evaluate its condition and compare it to similar homes to determine its value.
If the appraiser finds the home is worth the amount you agreed to pay or more, you will be ready to proceed to the next step. However, if the home is appraised for less than the agreed amount, your lender may be unable to fund the purchase.
Step 4: Begin the Mortgage Underwriting
Another important step in the loan process is underwriting. You will typically be contacted by a loan officer or processor, who acts as the point of contact between you and the underwriter. The underwriter reviews your financial information, such as credit score and income, and provides documentation. Additional information is often needed, so providing requested items quickly will keep the process moving.
Step 5: Receive a Decision
If you meet all the qualifications for an FHA loan, your loan application can be approved. This means that you can move on with closing on the home purchase. If your loan application does not meet the qualifications for an FHA loan and cannot be approved, the lender will issue a denial letter explaining the reason for the denial.
Step 6: Proceed with the Closing Process
Underwriter approval moves you to the closing process of an FHA loan. During this process, you should review the loan documents to ensure accurate information has been captured. You will also need to pay your closing costs (which can include an appraisal, loan origination, and other fees) at this time. Now that you’ve completed the steps in the FHA loan process, you’re ready to enjoy your new home and status as a homeowner.
Here's a calculator that can help you determine your FHA loan payments based on your purchased price, down payment, term, and interest rate. Not sure if an FHA loan is right for you? NASB has mortgage experts to guide you and help you determine your best route. Call us at 855-465-0753.
