Home Buyers can uses this FHA Loan Checklist to Prepare for a Smooth Application Process.
Before you start the FHA loan process, be prepared to provide some information to your loan officer. Have it ready now to save time later.
- 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
FHA loans are ideal for someone who does not have a lot of cash on hand. The downpayment can be as low as 3.5%, and the buyer may be able to finance some of the closing costs into the FHA loan. There is a Mortgage Insurance Premium (MIP) that must be paid, both at settlement and as part of the monthly payment. This can be stopped when the borrower has 20% equity in the house.
Another misconception that has floated around quite a bit is that a buyer using an FHA loan does not need a home inspection. This is bad advice that has unfortunately been passed on quite a bit, sometimes by real estate agents. There is a conditional appraisal, meaning the appraiser has specific items in the house that they have to look at to determine if the house meets certain standards. This would include peeling paint (there can't be any peeling paint in the house), loose and missing railings and electrical systems. The conditional appraisal is no substitute for a home inspection, and NEVER has been. The appraiser skips over many potential defects that a home inspector would probably find. Because it was becoming such a problem, several years ago FHA required an addendum be added to FHA contracts on the importance of getting a home inspection.
There are various types of FHA/HUD loans. The most common type is called the 203B, which can be used for a 1 to 4 family residence. Another is the 203VET, which is for U.S. military veterans only. VA loans have strict credit standards that some veterans might not qualify for, but they may still get some benefit of being a veteran through this type of loan. One more type is the 203K, which allows the borrower to finance repairs to the property along with the purchase price. This is more complicated, but it's a great loan for fixer-uppers.
One last requirement from FHA is that the borrower must live in the house. This loan program is not set up to help investors. It is there to help give people a home to live in. If the building is a 2, 3 or 4 family residence, the borrower would have to live in one of the units.
Click the link below to see information on Freddie Mac's FHA 203 (k) Rehabilitation Mortgages. http://www.freddiemac.com/sell/factsheets/pdf/fha203k_rehabilitation_mortgage_244.pdf
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