What Will My FHA Mortgage Broker Ask From Me?
There are many things about buying your first home you should be excited about. From the freedom of utilizing your space the way you want, to having your very own property under your own name, to actually building your own home equity compared to building someone else’s.
Having your own house can change plenty of things for the better, but it can also cost you an arm. Things like these don’t come cheap, and for the most part, you will have to look for a loan that can aid you not just to home acquisition but to financial stability as well.
For starters, many first-time home buyers resort to a loan under the Federal Housing Administration because these are easier to obtain compared to commercial and non-conforming loans. If you’re more inclined to applying for an FHA loan, your first concern is to make sure you qualify. A potential borrower will not need to contact a lender or a broker in advance to find out if he or she makes the cut. Many of these things are made known to the public.
So what exactly do FHA mortgage brokers look for in potential borrowers?
Firstly, one’s credit rating is an integral component in all of this and even sets the tone for other loan elements. Down payments and interest rates are determined by how high or how low one’s credit rating is. Out of the 300 to 850 FICO range, the lowest score an FHA-approved lender may consider is 500. Anybody who gets a 500 to 579 score may be extended a loan but will be obliged to pay a 10% deposit. Borrowers with a 580 mark or higher get a better deal, as only a 3.5% down payment is required from them.
To see for yourself how you fair in this department, you may approach the top three credit reporting bureaus in the U.S. and obtain your credit reports from them. TransUnion, Equifax, and Experian will all have these reports and it’s best for you to check them one by one to see what your rating is. Look for errors and make sure everything is accurate as this can affect the likelihood of your loan getting approved.
Moving forward, your income plays an important role in all this, too. Lending institutions check the proportionality of your bills versus your salary. One thing that can be wise to follow is to make sure your recurring monthly bills and your estimated house mortgage fees do not exceed one-third of your entire monthly income. People often think that lenders are only comfortable granting loans to professionals with huge salaries. And while there may be some truth to that, what matters more to banks and financial institutions is how much a borrower’s take-home salary is left for them after regular debt is deducted.
Existing loans can also alter the ballgame altogether should this affect your paying capacity. Car and student loans aren’t negative in themselves. But once added to your monthly debts, this may change your financial rhythm.
Moving forward, it is also important for a borrower to already have savings on the side specifically meant for a down payment and other fees. The initial steps right after the negotiation process may cost a borrower tons of cash even before huge sums of money are lent. Land titles, attorney fees, and closing costs are only a few examples of what’s to come. Many borrowers only think of how much lenders can afford to lend them without checking with themselves how much they’re able to shell out in the pursuit of home equity.
In terms of paperwork, the following documents are needed according to FHA.com:
- Address to your place of residence (past two years)
- Social Security numbers
- Names and location of your employers (past two years)
- Gross monthly salary at your current job(s)
- Pertinent information for all checking and savings accounts
- Pertinent information for all open loans
- Complete information for other real estate you own
- Approximate value of all personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms (past two years)
- Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals
To conclude, before reaching out to an FHA-approved lender to initiate progress, gather all these things first and put more effort in researching on what you’re getting yourself into. Click the link to know more about FHA home loan lenders.