A big key today in getting approved for a home loan is having all the right documentation lined up. You will be required to have the right documentation regarding your employment, salary and funds for your down payment. If you are aware what documentation is needed and you gather it ahead of time, it will significantly improve the process of getting approved for a FHA home loan.
Getting prepared for the credit check. It is important to get yourself a recent credit report so you can see your current score and review all your accounts and credit history. Make sure you get a credit report that combines the date from all 3 credit bureaus. You can have a loan officer check your credit or can go to one of the credit bureaus web sites.
Once you have obtained a copy of your credit report, make sure you read through it thoroughly and check to see all the information is accurate. You will have 3 different scores from each credit bureau. The score you will be interested in is the middle score. FHA lenders will throw out the high score and low score and use your middle score to qualify you. Generally you want your midde score to be above 620, but it is still possible to qualify if you are below 620.
FHA required Job History: Generally, FHA loan underwriters are looking for a 24 month job history to qualify. But there can be many exceptions to this. Gaps in employment are allowed if you have a good explanation (attending school, laid off, sabbatical, etc…). There also has to be an explanation if chaging careers within the 24 month job history.
FHA required Income Documentation for W-2 wage earners. If you are a W-2 wage earner, next you will want to gather your last months paystubs and last 2 years of W-2′. If you recieve a bonus as part of your income, the lender will require a 24 month history of that bonus in order to count that as part of your income. The lender verify’s your bonus history by send a “verification of employment (VOE)” form to your employer who will fill out details on your pay. Additionally, if you are paid hourly and your hours fluctuate or recieve overtime pay, the underwriter will also require a VOE and they may take an average of your monthly income over a longer period.
Providing the correct documents for your down payment and cash reserves. FHA allows you to recieve a gift for all of the down payment. If you are getting a gift, the lender will give you a letter to completed by the party giving you the gift. The FHA lender will also require documentation on the source of the gift and transfer to your account. If you are using your own funds for the down payment, the FHA lender will want to see you last 2 months statements from yoru bank account.
If your last 2 months bank statements that you supply show any large deposits, the FHA lender will want you to explain where the deposits came from.
Getting a home loan today requires detailed credit, income and cash reserve/down payment documentation. It is in your favor to be very organized and prepared to deliver your loan officer the documentation discussed in this article. Make you have this documentation ready and get it quickly to your loan officer. And make sure nothing is missing, there can’t be one page missing and everything has to be clearly readable. This ensure a very successful loan closing and minimize frustration.
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