A Federal Housing Administration (FHA) loan is a federally-backed loan designed to allow homebuyers to get into a new home with a low down payment. While not limited to first-time homebuyers, the loan is ideal for your first home. The FHA loan will allow you to get into a home with minimal money down, even with no down payment in some circumstances. In return, you will see a slightly higher interest rate and will be responsible for paying mortgage insurance until you are able to build the equity in your home to 20% of the home's value. Here are the recommended steps to obtain and use a FHA loan.
- First, determine how much you might qualify for. You can use this government mortgage calculator from GinnieMae as a guide but bear in mind it is only a guide and is not actually approving you for a particular loan. Simply enter your income and current monthly payment into the calculator and it will provide you with some idea of the loan you may qualify for.
Next, you will need to actually get your loan. Talk to some of the local lenders in your area, either by visiting the local branch or calling on the phone to discuss the loans that are offered. Explain that you are looking for a FHA loan upfront and the loan specialist will discuss what options they offer and what is needed for you to qualify. If you would prefer to do your research online, simply visit the webpage of your bank of choice or use a search engine to look for lenders who will take your application online.
After you have been approved for a FHA loan, you will need to find the home that you wish to buy. The lender will have given you an idea of the amount of money you should be looking to spend on a home, based upon your income, financial commitments and credit history. Contact a local real estate company to work with an agent who will help to keep you within your budget.
When you have identified the home you wish to purchase, work through your real estate agent to make an offer that is fair and within your budget. The seller will then accept, decline or counter your offer. When you reach an agreement on price, you can move onto the last step.
Finally, you will sign the loan papers to get your FHA loan. Contact your lender to let them know that you have identified a home; they will draw up the appropriate papers and have you sign them. You are now a homeowner with an FHA loan!