After 10 years of marriage, I’m still enjoying living in the first home I moved into with my husband. Buying a first home can be one of the most exciting events in a person’s life. Before making this important expenditure, people need to first sit down and determine how they will successfully finance it. After all, a home will likely be the most expensive purchase you make in your life. Talk to a loan officer and determine how much money you can reasonably borrow. Then, decide how much money you want to use as a down payment. You also must decide how many years you will finance your home for. On this blog, you will learn about the process of buying a first home with a loan.
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Buying a First Home
Three Tips to Prepare for an FHA Mortgage Application
Irma Bates
For many first-time homebuyers, an FHA mortgage is the best way to secure that first home loan. These loans are provided by private lenders via a government plan through the Federal Housing Commission. They are designed to help homebuyers that would otherwise have issues securing a mortgage. If you are in the market for a new home and want to take advantage of FHA lending, the following guide can help you get ready to apply for an FHA loan.
Tip #1: Know the qualifications
Before pursuing the FHA lending option, you need to make sure you are a candidate for the loan. The following are the general qualifications. They do change periodically, so make sure to check with a recent source to verify the specifics.
- You must show steady employment. Preferably, this employment should be in the same or a related industry while also demonstrating a generally upward trend in income. Exceptions can be made. For example, if you went straight from college into a job, the lender may consider the time in school as part of the employment requirement.
- Your credit score should fall into the fair category for all three major credit bureaus. Check with the FHA for current score requirements at least 6 months before applying, so that you can improve your score if necessary. A clean payment history for at least 6 months prior to application may also be required.
Tip #2: Have a down payment ready
An FHA loan requires a down payment of 3.5%. If your credit score falls below the current threshold, you may still be able to secure an FHA loan with a higher down payment. You will need to check with the lender to determine if this applies to your case. Start saving for the down payment well in advance. You will have to fully disclose where the money came from—whether it's from your own savings or from a gift. The reason is that the point of the down payment is to demonstrate that you can be fiscally responsible enough to save up the amount. If the full amount of the down payment comes from a gift, and you have no other savings, it can impact your chances of receiving the loan.
Tip #3: Collect your documentation
You will need to provide the lender with documentation at the time of application for the FHA loan. These documents are to prove income as well as residential status.
- Employment and income: Be prepared with two years of tax returns, W2 forms, or other official income statements. If you are self-employed, you may also need to show your profit and loss statements for the previous two years.
- Residential status: FHA lenders like to know that clients have a good history when it comes to paying for their housing. You will need to provide your addresses for the previous two years, as well as proof of payments or a letter from your landlord showing that payments were received on time and in full.
Contact an FHA mortgage lending firm for more help.
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