For those who are unaware, an FHA loan is a type of government-backed mortgage arrangement that allows a person to buy a home under a slightly looser set of financial requirements than the norm.
To qualify for an FHA loan, you have to meet several standards and requirements that are in place, so before starting on such a journey, it is very important to know what to expect from the process. With this in mind, here is a guide for first-time homebuyers who want to go down the FHA loan route.
Understand FHA Loans
It is important to familiarize yourself with the basics of FHA loans, as we have mentioned above, these are lender-approved loans for first-time buyers that offer lower down payments and more lenient credit score criteria.
Determine Your Budget
It can be helpful to use an FHA loan calculator (click for info) to review your financial situation and set a budget for how much you can afford to spend on your home. It will take into account everything from your income to your monthly expenses to your desired down payment.
Check Your Credit Score
FHA loans are more lenient with credit scores, but there are some limitations to this leniency. It is still important to have a semi-decent credit score, and you can request a free copy of your own from major credit bureaus such as Experian, Equifax, and TransUnion. If it is too low, you should start taking steps to improve it.
Contact some FHA-approved lenders to see if you can be pre-approved for an FHA loan. Getting pre-approval will give you a good idea of how much you might be able to borrow, and it will narrow your home search down to realistic properties.
Find An Estate Agent
Partner up with an experienced and knowledgeable real estate agent who specializes in working with first-time buyers under FHA loan conditions. Having them by your side will be helpful in terms of being guided through the process, finding the best properties, and negotiating on your behalf.
Now the fund can begin! Start searching for available properties with the following factors in mind; location, size, future growth potential, and amenities. This will be a combination of open houses and scheduled viewing in desired areas.
Make An Offer
Once you find the perfect property, it is time to make an offer! Work with your estate agent to prepare a competitive offer that takes into consideration everything from the sale price to contingencies to the proposed closing date.
If you are lucky enough to have your offer accepted, it’s time to finalize the details of the loan. You will need to provide all of the necessary documentation to your lender like income verification, bank statement, and tax returns. The lender will then order an appraisal to determine the value of the property in question.
Complete The Process
Once all relevant paperwork has been completed and your loan has been approved, the final thing to do is schedule a closing date. This will be a period in which all of your paperwork is reviewed for a final time, and when the closing costs have been paid, you will finally be able to say that you are a homeowner for the first time!