Obtaining a pre-approval letter from an FHA approved lender can be important. Most finance experts will attest that it important to get pre-qualified for a FHA loan prior to making an offer.
Yes, getting preapproved for FHA home loan can appear to be something of a process, but it can be a very rewarding one for prospective home buyers looking to finance a house through a mortgage insured by the Federal Housing Administration.
While a pre-approval letter states that a person is approved for a loan up to a certain amount, this does not guarantee fully that they will get the exact loan they are asking for.
Now is a Great Time to Get Pre-Approved for a FHA Loan
- Low Interest Rates
- 3.5% Down-Payments
- Easy Credit Requirements
- Quick Approval Process
- Pre-Qualification Letters
- FHA pre-approval letter
First, when looking to get a pre-approval letter for a FHA home loan, a person must find a FHA approved lender in their area. These lenders are often listed through the US Department of Housing and Urban Development, and these lenders can be found throughout the country. Once a desired FHA approved lender is found, the next step in the process can begin.
A person will want to then set up an in person appointment with their desired FHA lender to discuss filling out a pre-approval application. To prepare for this appointment, it is suggested that the applicant gather all of their important financial documents and records to submit to the lender for consideration of pre-approval.
These documents should include tax records, pay stubs, investment records, and banking records or information to prove that the applicant is financially stable enough to handle their mortgage payments.
Pre-Approval Letter for FHA Loans Adds Credibility to You Offer
The lender will then use this information and pre-approve the applicant for a set loan amount should they be found financially capable of handling a mortgage at that time. This pre-approval process allows a prospective home buyer to see just what he or she can afford when looking to obtain a home loan, and a pre-approval letter can make some home purchase offers somewhat more attractive to sellers.
A potential buyer with a pre-approval letter will have proof that they will be able to pay for the mortgage on a home, and this letter often shows that they are serious about following through with the buying process.
In most cases, home buyers can get a pre-approval online. Not too many years ago, applicants used to meet their lender in person. Before there was consumer trust on the internet, meeting with a lender in person enabled the prospective home buyer to examine their finances with the lender, and provide explanations for any problems that may arise. While pre-approval is not a complete guarantee that a desired mortgage will be approved, it does allow the process to go more smoothly.
What Credit Score Is Needed for FHA loan Pre-Approval?
Credit score: A minimum credit score of 580 (or 500 with a higher down payment).
Down payment: 3.5 percent (or 10 percent with a credit score between 500 and 579).
To Pre-Qualify for an FHA Loan, you will need:
- Income that can be verified.
- Capacity to cover housing expenses and current debts.
- Possess a minimum of 3.5% for a down payment.
- Maintain a good credit history with a credit score
- Select a house within FHA loan limits.
Is Pre-Qualification and a Pre-Approval the Same for FHA?
Although these terms are occasionally used interchangeably, they carry distinct meanings from a lending company or mortgage banker’s standpoint.
In essence, an FHA “pre-qualification” is not be as beneficial as pre-approval. Mortgage lenders can pre-qualify you based solely on the information you provide, but there is minimal verification during this process.
FHA pre-approval, however, delves deeper into verifying and scrutinizing your financial situation. Consequently, the lender can provide a more precise assessment of your borrowing capacity. Additionally, they furnish a letter indicating your pre-approval for an FHA loan, which can enhance your offer’s appeal to sellers, as it demonstrates thorough screening by a lender.
In the FHA pre-qualification process, your loan officer assesses your creditworthiness before granting pre-approval. While pre-qualifying is not a definitive assurance, it offers an estimate of the potential loan amount and FHA interest rate. Collaborating with your FHA lender during the pre-approval stage can provide insights into whether an FHA loan aligns with your specific circumstances.
How much time does it take to receive FHA pre-approval letter?
The preapproval process for a mortgage may take additional time as more information is required. Typically, you can expect to receive your preapproval letter within 2 -5 business days once all the requested information has been provided. Of course it is possible to get pre-approved for a FHA loan within 24 hours, but you should not expect that.
Obtaining preapproval for an FHA mortgage loan follows a process similar to that of getting preapproved or prequalified for a conventional mortgage from Fannie Mae or Freddie Mac. Nevertheless, there are a few additional requirements to consider when initiating the preapproval process.
Upon applying for FHA pre-approval, the lender scrutinizes the details you submit. Once the information is verified, the lender issues a FHA preapproval letter. This document specifies the approved loan amount and the corresponding interest rate. While it doesn’t guarantee loan approval, it serves as a strong indicator to sellers that you are a committed home buyer and that a mortgage lender is earnestly considering your FHA application.
What Kind of Documentation Is Required to be Approved for an FHA Loan?
We touched upon a few of the documents required for FHA loan pre-approval. Below is a more comprehensive list. At some stage in this procedure, you will likely be requested to furnish the following documents:
- Social Security card or Drivers License
- W-2 statements or 1099’s covering the last two years
- Pay-stubs reflecting the last 30-days (including year-to-date earnings)
- Employment verification letter
