FHA Mortgage Processing
The obvious approach in doing any work is to know that how the work will progress. You need to know all the steps from the initial step to the final before jumping in to do anything. Steps and guidelines are made to help you protect yourself from any undesired situation. Applying for a home loan is no piece of cake. It`s not like you apply, get approved and you will have keys to your house at the end of the month. First you need to have enough resources and savings to pay off the loan you are deciding to acquire. After that you would need to fish out the right lenders, have your financial background checked, deep verification of all the information you have provided, meet the minimum requirements of the lenders for a loan approval and have a detailed property check you want to buy. Only after these steps you will be approved of a loan for your house.
Federal Housing Administration (FHA) home loans have the most lenient of schemes and outlooks for borrowers who don’t qualify the high standards of other lenders. FHA mortgages are easy to apply for if and only if the borrowers meet the minimum mentioned requirements for getting qualified for a loan. But even for an FHA loan the processing takes time and follows some critical steps which cannot be overlooked.
There are six distinct phases involved in an FHA loan application which are discussed in detail below:
- Getting pre-approval for your FHA mortgage:
There is a small initial step before getting pre-approval for your mortgage and it is the pre-qualification step. Pre-qualification isn’t a focal step but a mere transaction of information between a lender and the borrower. This exchange of information may be through a phone call, face to face to conversation or by filling any kind of form. This step enables the lender to make assumptions based on the information you have provided to whether let you move to the next step or not. The lender asks you questions with little proof at this stage.
After getting pre-qualified you go towards the process of pre-approval. It is not a lengthy process and just requires the verification and inspection of your financial history. The lender needs to be sure whether you have potential to pay the loan you have requested. The lender will look at your credit history, bank statements, assets, debt and monthly income. At this stage the lender will also be able to mention an amount which he can lend you. This process helps you to know your position as a potential borrower. If you get pre-approved then it means that the lender is serious about your proposition.
After your pre-approval you get a chance to get yourself organized ahead of schedule. After the lender has checked your financial history he will then ask you for documentation which he will verify. This process gives you time to organize and manage the documents you require before time. This will most likely reduce the time for the application process and possible delays.
- House Shopping:
You are applying for a home loan then it means that you have a property in mind. This is also part of the loan process because a big part of the final loan approval depends on the property appraisal. A property appraisal from the lender`s side means that there will be a thorough inspection of the property you have decided to buy. The lender will determine whether the property follows the standard guidelines regarding the health and safety of the people who will there. House shopping is critical because FHA will not approve the loan if the borrower doesn’t intend to live on the property he has applied a loan for. Your property must be in good state which can pass the appraisal and good enough for a loan approval.
- Documentation Verification:
After the appraisal and the pre-approval process comes the verification of documentation. At this stage the lender will request to verify all the general documents and can at any point request for additional documents. Following is the list of the things that will need verification.
- Information regarding your current employment (name, place and phone number of your current employment).
- Monthly income including any bonuses, commission and overtime.
- Time period of employment and job title.
- Social security card including pension
- W-2s of the past two years
- Profit and loss statements if you are self-employed
- Child support and Alimony
- Number of bank accounts, savings and checking
- Additional property
- Gifted funds from relative or friends
- Stocks, shares and investments
- Car loans
- Credit card history
- Real property
- Current mortgages and debt
- Property taxes
- Homeowner`s association dues (HOA)
These are the general documentation that is requested but in some cases additional information can be requested depending upon the condition of the case.
- Mortgage Underwriting:
This is the key step in the loan application process. The underwriter now closely evaluates all the information you have provided and prepare a draft that whether the borrower and his property meet the minimum requirements of providing a loan. The underwriters verify that whether your credit history and current income is enough to pay off the loan as agreed in the form of downpayments. At this stage they will also verify the authenticity of the borrower.
The underwriters will give the final decision of approval and rejection. They may delay the approval if they mention some other conditions or they may approve the loan completely. The amount of the monthly downpayments is set with a particular interest rate.
- Loan application closing process:
In this step all the note-worthy documents are prepared, printed and sent to an attorney`s office. This is the place where the losing meeting takes place. You will receive a Closing Disclosure which will contain the expected costs of the loan. You will be given a 3-day time period to review the Closing Disclosure also, this time gives you a chance to once again review all the terms and conditions before binding yourself legally to it.
You should be able to fulfill your commitment to the loan according to the conditions mentioned in the documents. So be careful before agreeing and utilize the three day time period whole heartedly. You will also have time to do final reviews of the property you are buying. Make sure everything is in place and the place is up to the standards you have set.
After this time period it is nearly the end of the process where you finally sign the agreement and all the necessary documents for the transaction. You can expect the meeting to last for hours because there is a lot of paper work to cover. After that you can see the dream of having your own house coming true.