How to Prequalify for the FHA Loan
Many buyers find themselves looking to make a real estate purchase with not much cash on hand, or perhaps a subpar credit history. If you are in desperate need of real estate financing, and need a quicker, simpler option, you should consider getting prequalified for a FHA loan. The steps of approval of prequalification can assist you in understanding the basic process, and how much money the buyer can qualify for when in search of a lending institution. Now let’s dive into getting home buying power back, by teaching you all of the necessary steps to getting prequalified for a FHA loan!
What is FHA Loan Pre-Approval?
FHA loan pre-approval is a sign of the times. Being pre-approved gives you an advantage. And it’s a bit ironic because getting preapproved actually means you’re close to getting actual approval, in a way. Of course, you’re not there yet, but the keys to your next or future home are at least in sight.
Check Your Credit Score
Before you continue, check your credit score. Because the guidelines for conventional loans are stringent, those for FHA loans are more forgiving. A credit score of 500 is typically the minimum, but a credit score of 580 can warrant a lower down payment. Sites like free credit report services can give you a good look at where you are standing.
Find a Lender You Trust
All lenders are NOT created equal. Look for those with experience in FHA loans. A reputable lender will help you through the process and answer your questions. Look for reviews and referrals, and don’t be afraid of shopping around. This will set the stage for your homebuying experience.
Calculate Your Down Payment
One of the biggest perks of an FHA loan is the low down payment requirement. With a score of 580 or more, you’ll be required to pony up only 3.5 percent. If your score is between 500 and 579, that figure climbs to 10 percent. Use online calculators to determine how much you’ll need, then start saving money.
Understand FHA Loan Limits
But these loan limits aren’t one size fits all. Instead, whether you can borrow the full amount depends upon whether you are buying a single-family house, a townhouse, or a certain type of condominium and where you are purchasing it. In addition, for all of the reasons discussed above, it’s key to start by learning the limits where you are.
Stay Organized and Responsive
Once prequalified, the process isn’t delegated to the circular file. Keep your financial documents current and provide anything a lender asks for. Assuming you’re responsive, you’ll be that much closer to receiving FHA financing.
Closing Thoughts
Fortunately, getting prequalified for an FHA loan is a very helpful step in the home-buying process. If anything, it will lend you a hand in understanding your financial situation, and give you a clearer picture of how you will get qualified. By checking your credit score, searching for the best lender, gathering necessary paperwork, starting to shop, learning about your policies, and tracking your progress, you can ultimately receive a FHA loan.
You have a home in your future. Well… you might not if you don’t have an FHA loan pre-approval!