The FHA has three basic criteria for qualifying for an FHA loan and this is what a prospective borrower should be aware of. It is not enough to simply ask if you qualify. Qualifying on the FHA 203k can be tricky without the assistance of a qualified loan consultant. There are some steps involved in qualifying for an FHA loan and a consultation with an experienced consultant can help you through the process.
First, the inspection of your home needs to be completed. You need to have your house inspected by a professional to determine the condition of the structural framing and electrical and plumbing system. This inspection will determine whether or not the FHA loan can be provided based on your income. Your income will be used to calculate the value of the property and the loan amount. Having a certified inspector complete this step can save you time and money and also speed up the process of getting an FHA rehab.
Next, the appraiser will make a valuation of the home to determine the amount of loan amount and any closing costs. This will also determine the overall value of your home and determine the amount you can qualify for. The appraisal is needed because it is a pre-qualification for receiving funds based on the income you have. If you do not have enough equity in the home to obtain the full amount of the loan amount then the process will continue until all necessary repairs are made and the home is sold. You cannot borrow more than the amount of equity you have so you must stay within the equity amount specified in your appraisal.
Once the appraisal and evaluation have been completed, a written report will be provided to the borrower. This will include information on the condition of the property as well as a detailed list of all repairs and any necessary upgrades that must be made prior to closing. This is called the Pre-Closing Report. The closing cost or offer price will be listed on this report. The repairs or upgrades must be paid by the first month of the loan and any subsequent costs must be borne by the borrower.
If your credit rating is excellent, you can obtain a faster approval at a lower interest rate than you would if you applied for a traditional mortgage loan. Your credit score is a measure of your future value and your ability to borrow money. An FHA loan is very low interest loan that you can borrow using an FHA loan for any purpose. You are able to borrow against the future value of your home up to the amount specified in your contract if you apply for an FHA loan. Any additional funds over the value of the home will be paid by the borrower.
These loans are easier to qualify for than other loans. You will need a minimum credit score or income level to qualify. If you are a veteran, you may be eligible for even more advantageous loan terms. The payment requirements for these loans are very reasonable. If your home has been significantly improved, or you have any financial problems, you can still obtain an FHA loan with reasonable payment requirements.
Most traditional loans require a credit score of at least 720. If your credit score is lower than this, you may still obtain an FHA loan with payment requirements that are less than the standard rate. These loans require less documentation and processing. If you have reasonable repairs to make to your home, you may be approved for both of these types of loans. FHA loans are also easier to qualify for than many conventional loans.
A traditional mortgage can be quite stressful when it comes to paperwork and loan application requirements. It takes time to get things together and get the paperwork together to properly file for a loan. With an FHA loan you simply complete an easy application and submit the appropriate forms. You will have the satisfaction of knowing that your home is going to be insured and that there are no additional costs to cover during the closing process. An FHA loan will help you achieve your dreams of owning your own home.