How to Get an FHA Loan in 5 Easy Steps

If you’re a First Time Home Buyer in Florida that is using an FHA-Insured home loan to buy a house, you probably have a few questions still looming; what is the process? How long does it take to get approved? Which is totally normal and expected. After all this is a pretty big deal and there’s more to get excited over than stressed out–you’ll agree by the end of the article.

Getting an FHA Loan approval can seem as long and out of reach as a road vanishing off into the horizon, but we always hear about one of those few cases where a borrower breezed through the whole process with minimal time and effort spent. These hopeful cases attribute much of their successes to being prepared and knowledgeable in the loan approval process.

We can summarize the entire process itself in five steps: pre-approval, applying, property appraisal, underwriting and then, finally, approval! Here’s what you have to know about these steps as a borrower.

1) Pre-Approval Process (Optional)

Even though this is an optional step we still highly recommend you do it for these main reasons:

• To see if you are even qualified
• To access how much money can be leant to you

Having a pre-screen in writing by a mortgage lender will  better your chances for approval because the seller/home owner sees that you have already been approved and. this in turn, also saves you a lot of time. Imagine, finding your dream home, negotiating prices, getting your hopes up, only to be denied a loan in the end. That time could’ve been spent on more realistic goals–although we always are pulling for you to get approved no matter what.

2) Standard Loan Application

First you’ll be asked fill out a Uniform Residential Application form (Fannie Mae form 1003). This typically happens after you have found a house you are interested in and have made an offer to buy it.

This form is filled after you’ve selected a home because it asks for the address of the house of interest, along with what type of loan you are applying for. Here are a few issues that may come up during this phase of the FHA Loan approval process:

1. Some lenders will have you fill out this form prior to your FHA approval process (step 1) in which case you’d have to leave the address blank, since you have not decided on a location just yet.
2. The loan application can take some time to fill out because it asks a litany of questions:
3. You might be required to pay an application fee at this point OR in your closing costs, which you can pay later on when you actually close the deal.

3) Property Appraisal

At this point the lender will want to know the true market value of the property–hence the term “property appraisal”. What the lender will do is hire a a licensed appraiser to evaluate the property and assess what the current market value is.

The lender basically want to know the potential resale value of the home in case they have to foreclose or resell down the road since ultimately they are investing more than you are.

How does this relate?

• If the property costs more than the amount agreed on then your loan process will more than likely move forward.
• BUT if the appraiser finds it to cost less than the agreed amount, you’ll hit a wall. In this case you can either try reducing the selling price to match the appraised value, get a loan for the appraised amount or walk out on the deal.

In our opinion it’s best to just ask the seller to owner to reduce the price to better match the appraised value, this way both of you can get on with the process and keep everything on track. However, sadly, all the reason and the logic in the world can’t always save the day. Financial greed, lack of market awareness or simple sentimental attachment can make their way into the mix and make things impossible in which case you’ll have no other choice other than to walk away from the transaction.

4) Underwriting and Document Review

This is one of the more critical points in the FHA Loan approval process and to be honest it can be absolutely nerve-wracking at times. This is due to the fact that the buyer–you–won’t deal with the underwriter directly. Instead your point of contact will more than likely be either a loan officer or processor.

Underwriters analyze paperwork, income, credit score and a couple other factors to solidify the loan. If issues are found you’ll have to provide a Letter of Explanation (LOE) or take actions in resolving the issue manually. If this happens to you don’t panic! This is fairly common, just comply with what ever is asked of you at that point and get the ball rolling again.

Now, if serious issues are found then that could signal the end of the road for you. They either make or break the deal which is why I mentioned that this is truly one of the more critical moments where all your hopes and dreams are clinging onto someones judgement of you. Hopefully you’ll blow through this step with flying colors.

If you can manage to get past this with flying colors–or even small problems–there’s a promising chance that you are home free.

5) FHA Loan Approval (Alleluja)

Once the underwriter is satisfied you are “clear to close”. In other words you can move forward with the closing process and receive financing. The closing process is also known as “settlement” in some states, in which you will sign a myriad of paperwork and pay any remaining fees which is typically referred to as “closing costs”.

Once all is paid and the title is transferred under your name you will then get the keys to your new home!

We wish you the best of luck in your venture and don’t forget, when it comes to funding your way into your new home, trust MortgageGrants.com. Your largest available online resource for down payment assistance programs.