Los Angeles, Ca (PRWEB) January 22, 2013
When a potential borrower begins the process to qualify for an FHA loan, the first step is determining just how much a borrower can pay for a property. Red Blue Realty provides some tips for making the qualification process go more smoothly.
FHA mortgage lenders look at two main factors in order to approve a borrower for a loan.
First, they look at the borrower’s ability to repay a loan, and second, that borrower’s willingness.
The ability to repay a loan is based on current employment and income. In general terms, lenders prefer a borrower to have worked at the same place, or, if self-employed, have been in business for at least two years. It is also important to be in the same line of work, rather than moving from job market to job market.
A borrower's willingness to repay is often based upon the use of the property. If the borrower will be living in the home rather than renting it is one consideration. Another basis for willingness to repay is made by examining the borrower’s previous financial commitments, including the borrower’s credit report, and rental payment or previous property mortgage payment history.
To qualify for an FHA loan there are no hard and fast rules, as every borrower is assessed individually. However, with every loan, the processor will order a borrower’s credit report, a property appraisal report, and a title report. The processor will also need to verify an applicant’s bank statements and deposits. Credit issues that appear on a credit report will need to be addressed in order to qualify. These include credit issues like collections or late pays, or a judgement on the credit record. These black marks may require a written explanation be provided by the borrower.
There are certain records that loan processors always require to qualify for an FHA loan. These include such items as pay stubs, W-2's, and for self-employed borrowers, tax returns. Receiving loan approval may go faster if borrowers present bank statements and statements for mutual funds for the three months that are prior to application.
Red Blue Realty believes that it’s also a good idea for a borrower to get a copy of their credit reports for themselves. This allows borrowers to assess and address any credit issues that could appear on the report. Borrowers can improve credit by not applying for too many credit cards, keeping credit balances low, and paying their bills on time. They can also close out any accounts that have a zero balance, as just keeping the cards themselves can adversely affect credit.
Should there be any black marks on a borrower’s credit, or indications of past bankruptcy or foreclosure, borrowers can address these with the lender and work to resolve them. A borrower whose credit score is 680 or above is considered to be an A+ borrower; which will approve a loan more quickly and allow the borrower to apply for the lowest interest rate on loans.
A score that is below 680 but still above 620 may encourage underwriters to evaluate a borrower more closely. ‘A’ valuation may still be possible, but the loan may take longer to close. Borrowers whose credit scores are below 620 may not receive the best rate and terms available.
Finally, in order to qualify for an FHA loan, the borrower must provide the lender with a property appraisal. The appraisal defines property worth based upon the cost of the property or comparisons of the property within a given neighborhood. Income valuation is another way of appraising property that is geared for rental.
With necessary paperwork completed and with the lender, borrowers need only wait for the completion of loan processing.
Phone Number: 1-(855) 66-RBREALTY or 1-(855) 667-2732