The FHA Mortgage Process

Getting Started

Starting the FHA mortgage process begins with assessing your financial situation, including your credit score, income, and available funds for a down-payment. Next, research loan options with an FHA home specialist to find the best fit. Getting your pre-approval quote helps determine your budget and strengthens your offer when house hunting. Once you find a home, your FHA specialist will help you submit a formal mortgage application, provide necessary documents, and go through underwriting, where they verify financial details. A home appraisal follows to confirm the property value. Finally, once approved, you will review and sign closing documents, and receive the keys to your new home! 

Free Pre-qualification Quote

 The FHA mortgage pre-qualification process is  the initial step in the home loan process, giving a  borrowers an estimate of how much they may be able to borrow. It simply involves providing basic details, such as income, downpayment availability, and estimated credit score. Unlike a full application approval, an FHA pre-qualification does not require extensive documentation or a full credit check. An FHA specialist reviews the provided information and gives a preliminary assessment of loan eligibility. An FHA pre-qualification helps buyers understand their budget and shows sellers they are serious. It is a useful starting point for homebuyers before making an offer on a property!

Mortgage Programs Á Rates

An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Nowadays, FHA loans are the most popular home loans, especially with first-time home buyers because the requirements are less strict than conventional loans. An FHA specialist can help find the best FHA Loan Program and the lowest available rate to fit your situation

The Mortgage Application

 The first step begins by getting organized and completing your mortgage pre-qualification application. Anything you can do, to prepare in advance, will reduce the stress when you find the right home and make an offer. At that stage, you will be able to hand over all your paperwork to your loan officer when needed. Being ready is an important step!

Common documents include::

  • Your credit report
  • W-2s
  • Pay stubs
  • Most recent Federal Tax return
  • 2 Months of bank and investment statements

 Once an FHA lender has gathered information about a borrower's income and debts, a determination can be made as to how much the borrower can pay for a house.

FHA Home Loan Estimate

 A FHA home loan estimate is a document provided by the FHA Lenders outlining the expected costs of  the mortgage. It includes key details such as the loan amount, interest rate, monthly payments, closing costs, and taxes. FHA Lenders must provide this estimate within three business days of receiving the FHA mortgage application. This estimate ensures transparency in fees and terms. The FHA Home Loan Estimate serves as an important tool for financial planning. Reviewing it carefully can prevent unexpected expenses and help borrowers make informed decisions about purchasing a home.

Intent to Process

Notice of Intent to Proceed with Loan Application (NIPLA) is a letter signed by the loan applicants to inform the Bank (or lender) of their intention to proceed with the loan application and their acceptance of the terms and fees listed in the Good Faith Estimate (GFE).

NIPLA is prepared by the loan processing department of the lender and included with the GFE. The loan applicants review the GFE to understand the loan terms and fees. If they find terms of loan mentioned in the GFE acceptable, they will then sign NIPLA and return it back to the lender to signify their approval to ahead with the loan. With the receipt of NIPLA, the lender can move the application to the underwriting process and can charge fees from the applicants.

Processing

An FHA Loan processor gathers documentation about the borrower and property, review all information in the loan file and assemble an orderly and complete package for the underwriter. They will open the file and get the following wheels in motion:

 Required Documents:

Common FHA documents include, but are not limited to, the following:

  • Loan Application
  • Form HUD-92900-A
  • SSN Verification
  • Credit Report
  • Verification of Employment
  • Tax Returns
  • Sales Contract
  • FHA Amendatory Clause
  • Real Estate Certification
  • Appraisal Report

Credit Reports

Mortgage credit reports are used for real estate loans. They are used to underwrite the original loan to buy the real estate, for refinancing the original loan, and perhaps in second mortgages or home equity situations when the loan applicant is increasing the original loan to improve the unit or to take money out of the accumulated equity in the home for some other reason.br>
Mortgage credit reports are generally 3 bureau credit reports with 3 credit scores where the lender is obtaining credit information on the applicant or applicants from all 3 of the national credit bureaus and credit scores based on the FICO model or the VantageScore model. The credit information can be presented to the lender in an "infile" format which is effectively as it comes from Experian, Equifax and TransUnion, but in a readable format, and without much merging or combining the credit data.

The infiles may also be merged or combined, for example the Experian credit data may be merged with Equifax credit data, which is then merged with TransUnion credit data. This is called a merged infile. When all 3 bureaus are merged, it is commonly called a 3 bureau merged infile.

Appraisal Basics

A home appraisal is an estimate of a property value. FHA lenders require an appraisal on your home before they will provide a loan for the simple reason that the property is the underlying asset that serves as collateral for the loan.o:p>

A home appraisal value is based on such factors as home size, number of bedrooms, number of bathrooms, the location and age of the property, and interior improvements. These facts about your home will be compared with other homes that the appraiser considers comparable to come up with your home value.

Underwriting

The underwriter is responsible for reviewing the entire loan package and issuing the approval documents for the closing. They are reviewing all the details for compliance to all regulations and guidelines as established by Fannie/Freddie/HUD and state and national regulators. 

Closing Disclosures

The FHA Home Mortgage Closing Disclosure is a crucial document provided to borrowers at least three days before closing on an FHA home loan. It outlines key loan terms, including interest rate, monthly payments, closing costs, and other fees. This five-page document ensures transparency, allowing borrowers to compare final costs with the initial Loan Estimate. It includes details on escrow accounts, prepayment rules, and total loan costs over time. Borrowers should carefully review it for accuracy and discrepancies before signing. If errors or unexpected fees appear, they can request clarification or corrections. Understanding this document helps ensure a smooth closing process.

Closing

 The home mortgage closing is the final step in securing a home loan, where ownership officially transfers to the buyer. It involves signing legal documents, paying closing costs, and finalizing loan terms. The buyer typically reviews and signs the mortgage note, deed of trust, and closing disclosure. Closing costs may include lender fees, title insurance, and property taxes. A closing agent or attorney oversees the process, ensuring compliance with legal and financial requirements. Once all documents are signed and payments are made, the lender funds the loan, and the buyer receives the keys. This marks the completion of the home purchase.