June 3, 2015
There are many steps to purchasing a home with an FHA mortgage loan. House hunters don’t normally begin this process by picking up the real estate listings or exploring them online; house hunting is a process that should begin at least a year in advance of buying the home with an FHA loan with financial planning.
Getting Your Finances Ready For An FHA Loan
Preparing for your loan application a year in advance is strongly recommended. You’ll need to check your credit scores and make sure you bring a minimum of 12 months worth of on-time payments on all your financial obligations to the application process. Doing anything less can hurt your chances for loan approval.
It’s important to remember that your lender will check the amount of debt against your current income–try to reduce as much of your debt as possible before applying for an FHA loan. That can also mean reducing sources of potential debt like credit cards you no longer need or use.
Budgeting
A home loan requires up-front costs including a minimum down payment (3.5% of the home’s price in most cases), appraisal fees, closing costs, etc. Saving for these expenses is a very important part of the planning process. Appraisal fees, closing costs, insurance and other expenses are not standardized across the nation; you’ll need to consult with a local lender or housing counselor to know what approximate costs might be in your area.
Doing Research Into Where You Want To Live
During your financial preparations, you can also being exploring the neighborhoods where you might want to live–what are the home prices like there? Are there schools, public transportation, and local conveniences nearby? Does the location of your neighborhood cross flight paths or other noise zones? All good questions to ask in the planning stages.
Get Pre-Purchase Counseling From A HUD-Approved Agency
One of the best things an FHA borrower can do in the planning stages of the FHA loan is to call the FHA/HUD at 1-800 CALL FHA and request a referral to a local, HUD-approved housing counselor who can help with advice on the home buying and FHA loan process. You can never go wrong with housing counseling–there is always something to learn or prepare for, especially for first time home buyers.
House Hunting, Shopping Around For An FHA Lender
When your finances are in order, you have 12 months of on-time payments and money saved for the expenses of your home loan, then it’s time to start house hunting. You can also begin comparing FHA lenders to see who might be offering the best rates and terms for an FHA loan. Your financial qualifications will determine interest rates and terms, so the initial shopping-for-a-lender phase may be more preliminary, but it’s good to know who is out there offering FHA loans and a basic general idea of their rates and terms.
Once you have found a home you want to make an offer on you can work more directly with a lender to get an idea of what kind of interest rates and terms you qualify for. Remember, no two lenders are exactly alike, so if you don’t find one that meets your needs, try again with another participating FHA lender.
Do you have questions about FHA home loan rules and regulations? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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