FHA Loans in Tooele UT
How to Apply for an FHA Loan
FHA loans have become one of the most popular financing tools for Tooele UT home buyers. They are particularly popular among first-time buyers with limited cash for a down payment. (see our page about no money down loans).
In this article, you’ll learn how to apply for an FHA-insured mortgage loan.
Meet the Federal Housing Administration (FHA)
The FHA was first created in 1934. It’s part of the federal government, managed by the Department of Housing and Urban Development (HUD). The purpose of this organization is to make home ownership affordable to a larger number of Americans. The FHA does this by insuring the mortgage loans made by approved lenders.
This is an important distinction to understand. The Federal Housing Administration does not make loans to consumers — instead, it backs the home loans made by primary lenders (such as Wells Fargo, Citi, local mortgage companies, etc.).
The FHA insures these lenders against the risk of default. In other words, if the homeowner falls behind on the mortgage and can no longer make payments, the federal government will help cover the lender’s losses.
This reduces the amount of risk involved in making the loan. When there’s less risk involved, a lending institution is more inclined to lend money to borrowers who might not otherwise qualify for a loan. That’s why the program is popular among borrowers who can’t afford a big down payment, and those with less-than-perfect credit scores.
Applying for an FHA Loan
With that introduction out of the way, let’s talk about how you would apply for an FHA-insured loan. For the most part, the process is the same as applying for any other type of mortgage loan. You would start by submitting an application through a regular lender. We have a list of lenders on our website tooelehomesforsale that we recommend and that we know understand the home mortgage business.
There is a standardized application form used for most home loans these days, including FHA. It is called the Uniform Residential Loan Application (URLA). It’s also known as Freddie Mac form 65, or Fannie Mae form 1003.
This is where many people get confused. The FHA does not make loans directly to consumers. They insure the loans made by lenders that operate in the private sector. So you would not apply through the FHA. You would apply through a mortgage lender that is approved to offer these loans.
So your first step is to find a “HUD-approved” lender. You can do that by using the interactive lender list on HUD’s website.
Once you apply for a loan, your application will be reviewed to ensure it meets the requirements set forth by the FHA, as well as the lender’s own requirements.
What to Do Before You Apply
Before you apply for an FHA loan, there are some preliminary steps you should take. This involves gathering your paperwork, reviewing your credit, and more. Here are some of the steps you should take before applying:
- Check your credit score and your debt-to-income ratio. These are two of the most important qualification criteria the lender will look at when you apply for the loan. So it’s a good idea to see them for yourself.
- Check the average interest rates for the type of loan you want. You may or may not qualify for that average, because it’s based on your credit score and other factors. But it’s still a good idea to survey the landscape before venturing into it. You can get this information from Freddie Mac’s weekly survey (freddiemac.com/pmms).
- Start gathering your paperwork before you apply for a loan. This includes employment information for the last couple of years, as well as W-2 forms and tax returns for the last two years. Your lender will give you a complete list of required documents when you actually apply, but it never hurts to start early!
Sound like a lot of work? Could be, but it's worth it. Here are some articles from other agents in the business that may offer more perspective than I have.
HA Loans - 7 Crucial Facts About FHA Loans | Bankrate.com
Because of low down payment requirements and relaxed lending standards, FHA loans are on today's mortgage borrowers radar. Here are 7 facts about FHA loans.
Complete Guide to FHA Loans and Mortgages - Zillow
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required. Borrowers who cannot ...
FHA Loan vs. Conventional 97 - The Mortgage Reports
However, for many buyers, the choice of which low-downpayment loan to choose will rest between the FHA loan and the Conventional 97. This is because VA loans are available to military borrowers only; and USDA loans ...
Still not sure what to do? Call me Berna Sloan 435-840-5029. I can recommend a few lenders in the Tooele area that you can rely on to walk you through the steps of getting FHA loans in Tooele UT, and being there with the mortgage money when the deal closes.
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