With home prices continuing to fall around the country and mortgage rates hovering 4%, now is a great time to get approved for a FHA home loan. In today’s market is pays to have your “ducks in a row” before getting pre-approved for a “FHA refinance loan”.
1. Keep your credit scores as high as possible. If your fico scores are above 680 you will have more options for a new home loan. If your credit scores are lower there is still FHA mortgage options, but the higher the scores the more options you will find.
2. Choose a home that you can afford. It is important that you stay within a budget when shopping for a home. Your debt to income ratio is an important factor for getting pre-approved for a FHA loan.
3. Save at least enough money for the down-payment and closing costs. In most cases the down-payment for FHA home loans is 3.5%. Closing costs average around $3,000 and this covers title, escrow, processing, underwriting, etc.
4. Get organized and be prepared to document your last 2 years of employment. This means that you have photo copies of your W2′s, 1040 tax returns and months’ worth of pay-stubs.
5. Have a 12-month history of rental payments ready. You will need to documents showing the FHA lender that you made your housing payments on time.
Getting pre-approved for a FHA loan is easy if you follow these 5 steps. We recommend getting pre-approved before shopping for a home, because when you find the house you want to buy, you better be ready. Sellers are looking for motivated buyers who are have the lending qualifications met, otherwise they may choose another offer over yours.