How To Get an FHA Loan

Smiling couple shaking hands with a broker after signing a mortgage loan.

If your credit score isn’t so hot and you can’t afford to make a sizable down payment, then a mortgage backed by the Federal Housing Administration might be a good option for you. FHA-insured loans reduce mortgage lenders’ risk, allowing them to offer loans with generous eligibility requirements to borrowers.

How To Apply For an FHA Loan

If you think an FHA loan might be right for you, here’s how to get the ball rolling.

1. Find FHA-approved lenders

To get an FHA loan, you need to work with an approved lender. The Department of Housing and Urban Development keeps a searchable list of approved mortgage lenders.

2. Get loan preapproval

When you apply for mortgage preapproval, the lender will review your finances and issue a letter that details the loan it expects you to qualify for. Preapproval isn’t a guarantee of a loan, but it gives you an idea of how much house you can afford. Preapproval also shows real estate agents and sellers that you’re ready and able to buy a home.

3. Find a qualified home

To get an FHA loan, the property you’re buying must meet requirements and codes set by HUD. An FHA appraiser will be sent to inspect the home for structural issues, as well as health and safety hazards. If the home doesn’t meet FHA standards, repairs will be needed before you can close on your loan.

4. Submit your loan application and documents

To get an FHA loan, you need a credit score of at least 500 if you’re making a down payment of 10% or more. You can make a lower down payment of at least 3.5% with a minimum credit score of 580.

You also will need to document your finances. Expect your lender to ask for:

  • Your Social Security number.
  • Your gross monthly income.
  • Your addresses for the past two years.
  • Your employment history for the past two years.
  • Information on your banking and financial accounts.
  • The approximate total value of all your assets.

If you’re self-employed, expect to provide your lender with two years of tax returns, income statements, and balance sheets.

5. Choose a loan

After you apply for a mortgage of any type, you’ll receive a loan estimate from the lender within three business days. The loan estimate contains important details about the mortgage that it expects to offer you, including the estimated interest rate, monthly payment, and closing costs.

All types of mortgage lenders are required to use a standard loan estimate form, which makes it easier to compare offers from multiple lenders. It’s a good idea to shop around and get estimates from several lenders so that you can choose the right mortgage for you.

6. Close on the loan

After you submit all the necessary documents, an underwriter will review your finances to confirm that you can afford the loan. If the home appraisal finds that repairs are needed, then those will need to be completed before closing.

On closing day, you’ll sign the final paperwork and pay your closing costs, which you can expect to cost 3% to 6% of the purchase price. You also will need to pay an upfront mortgage insurance premium that will be 1.75% of the base loan amount.

How Long Does It Take To Get an FHA Loan?

From the time you first apply for a mortgage until you close, you can expect the FHA loan process to take 30 to 60 days.

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