Wednesday, March 18, 2009

Keys to being totally ready to get approved an FHA home loan

By Rob Chomentowski

Gone are the days of low documentation home loans. Getting a home loan today requires a lot of documentation. And if you are prepared, it will make the process a lot smoother

Credit Score and History: The very best place to begin preparing for an FHA loan is to check your credit score. Make sure you get a "tri-merge" report that merges all your credit information from the 3 credit bureaus. You can get one at www.myfico.com or at any of the credit bureau web sites (Experian, Equifax, Trans Union). Or you can work with your loan officer to do a credit check for you.

It's important to review your credit report in detail to make sure every thing is correct on it. FHA is fairly flexible on credit scores and credit history, but you really want to make sure everything is accurate on your report. Make sure you take the steps required to remove any inaccurate information.

Work history evaluation for FHA loans. The FHA lender is primarily concerned with your last 24 mos of employment. They will be looking at how steady you have worked the last 2 years. It does not disqualify you if there were periods you were not working the last 2 years. But you will have to have good explanations for the periods you were not working. Being in school or being unemployed are examples of explanations that are generally sufficient.

Salary documentation needed for an FHA loan. If you are paid wages by your employer and reciece a W-2, the FHA lender will require your most recent 30 days copies of your paycheck. If part of your income comes from overtime, bonus and or your are paid hourly, the FHA lender will require your employer to fill out a form that your loan officer will send to them to explain the details of your pay. You must have recieved bonus income the last 24 mos to include it in your income. Oftentimes if your hours vary monthly or your recieve overtime pay, the FHA lender will take a long term average of your income.

Documenting your down payment and cash reserves. The FHA lender will want to see your latest 2 months of bank statements, every page, to show where your down payment will be coming from. FHA allows you to recieve a gift from a relative or someone like a relative for the down payment. The donar of the gift to you must document the source of the gift and you must show how the donar transfered the gift funds to you.

Be careful of large deposits showing on your bank statements. FHA underwriters will ask you to "source" any large deposits into your bank account over the last 2 months.

Details are extremely important with all the above documentation. You have to be meticulously detailed with gathering all the documentation, making sure it's clearly readable and making sure not even 1 page is missing. For instance with your bank statements, you must have EVERY page of your recent bank statement, there cannot be one page missing. And the statements must have your name and account number on them. And for example if you are self-employed, you must have ALL pages and ALL schedules of your personal tax returns (and corporate if you own the company). There can't be any missing pages.

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