8 Steps to buying a home with an FHA Loan
Hey this is Chris Trapani the Mortgage Pro.
This video is going teach you eight steps of what you need to do to buy a home using an FHA loan. It’s going to give you the guidelines, it’s going to give you all kinds of things.
What documentation you’re going need and how the whole home buying process works with
an FHA loan!
#1 – FHA is not an actual loan. FHA stands for Federal Housing Administration.
What it does is, it insures the loan so that people with a small down payment can buy the home. Otherwise without the insurance the risk would be too great, banks wouldn’t offer financing, and no one could buy a home in that in that situation.
#2 – FICO score.
As low as a five hundred FICO score will allow you to buy with FHA.
You can buy from FICO
- 500-579 = 10% down
- 580 and above = 3.5% down
Gone are the myths of the twenty percent down to buy a house. You can buy your own
house with as little as three and a half percent down with an FHA loan.
#3 – Bankrupcy
Here’s a question people always ask me Chris I have a bankruptcy well
with an FHA loan two years must have elapsed from the time it was discharged
till the time you can buy. Chris I have a foreclosure – I had a short sale. Three
years must have elapsed from the day of the short sale or foreclosure and you
could buy your own home again.
#4 – Debt Ratio
If you make ten thousand dollars a month and I’m not saying if you make 10 grand but I’m just giving it to you for even number purposes – you can go to forty seven Percent. Of that forty seven hundred dollars for qualification purposes for the house. Fifty seven percent when we take the total house payment and the car payment and the student loans child support, alimony, credit cards all the debts put together – fifty seven percent. So take your monthly income before taxes fifty seven percent will include your debt forty seven percent will be the house payment it must require and here both those criteria.
#5 – Income requirements (most cases)
You must have a two-year history of working in the same field in the same industry. Example, if you just started a job working for Federal Express delivering packages and you started doing that today , well if you don’t have a history in delivery for the last two years you’re going to have to wait two years. Going forward however, if you worked for ups for the last two years or the post office or something in the same type of industry then as long as you have that two year history we’re good, even though you’ve just started the new job.
Now if you’re self-employed what we’re probably going to do is we’re going to average your income over two years. That’s your net income, that’s what after you write everything off all your expenses.
If you just have a job and maybe your salaried it’s very simple but if you’re hourly, we’re going to calculate you hourly and we’re going to average your overtime over two years.
So we can look into things in a number of different ways. We’re experts at figuring this out. Now once in a while people say to me, Chris I’ve only been doing this six months and I ask did you get an education in this field maybe a college degree maybe a certificate program maybe you went to a year of training to become a radiologist or a radio technician that type of thing well we can use that in lieu of the two years experience so there’s a lot of tech tips tricks trades little things we can do but you need to show me what it is so I can help you qualify for that loan.
#6 – Documentation.
We must prove everything forensically. Proven on paper – how much do you make – how much have you made for the past two years.
The documentation you’ll need
- two years w-2s from your
- two years federal taxes
- one month’s pay stubs ( if there’s a husband and wife both working need it for both)
- two months bank statements for any accounts that you might have savings account retirement account check an account all the different banks or credit unions or whatever type of money accounts, we need two months worth and we need all pages. If a page says this page is intentionally left blank I need that page. It sounds silly I know, but those are the guidelines
- your driver’s license
- social security card (this is super important in today’s day and age of you know what we have to deal with and the Patriot Act but it’s federal law we have to get those documents
- bankruptcy papers if you’ve had one
- divorce decree if you’ve been divorced
The last few are on a case-by-case basis, we’ll let you know what they are based on your individual circumstance. The paperwork is super important, if we ask for 10 things and we get nine it’s kind of the same as having zero we need them all.
#7 – The loan process
Not all pre-apporvals are equal. Many lenders out there will get you “pre-approved” by their in-house dept and run into problems funding the loan later on becasue their in-house department doesn’t work by the same rules as the lenders.
What I like to do is gather all documentation I actually send it to the underwriter. The underwriter is the person who approves or denies the file at the lender. I send all the paperwork as if we already have a property we’re ready to go I send you a credit I send you bank statements I send you everything that it takes and I let the underwriter say yes you’re approved or no, we need this additional documentation (which is very common). When you make an offer you’re going to do it from a position of strength so we get you pre-approved and now what’s going to happen is you’re going to go with a realtor ( if you don’t have a realtor I know all the best most experienced realtors in the industry I’ll give you a great realtor) now you’re going to go with the realtor in your price range he’s going to show you houses, condominiums, whatever you’re looking for in your individual circumstance and if you find that one or two properties that you say hey this is the one what happens is they the realtor is going to write an offer and submit it to the agent who did the listing and I’m going to assist them with helping to get your offer accepted. In today’s day and age there are seven to ten offers for every property on the market because there’s a shortage of houses and this is driving the prices up so time is of the essence you want to get this going now. Here’s what happens they’re going to review the offers they want to see which property and which offer is going to make the most sense for them obviously they’re going to look at which one’s going to pay us the most money they’re going to look at which one is most likely to close that’s super important because sometimes there are offers that are not very good not very strong borrowers so they’re going to evaluate all these things that’s where I get involved I call them up and tell them this is Chris the mortgage pro and I have a slam-dunk deal ready to go that is not pre-approved it’s already approved that will raise your offer near the top of the list if not to the top so that’s a very big deal once the offer is accepted what happens is we’re going to start with the loan process there’s disclosures and paperwork we’re in a very bureaucratic age in the mortgage industry and the whole mortgage industry is are going to require you to sign paper about this thing thankfully we can do it electronically today you could just click on your computer or on your phone and accept those disclosures the next thing we’re going to do is we’re going to order title we’re going to open escrow and we are going to order the appraisal we handle all of that so you don’t have to and again the underwriter is going to look at the appraisal they’re going to look at the title they’re going to look at escrow see if everything is acceptable is there any additional paperwork that we need from you the borrower has any changed and when we put all that together and they issue what’s called a clear to close that’s when we start doing the happy dance we’re excited everything’s going good we start the closing proceedings there’s going to be a paper that’s going to be emailed to you call the closing disclosure and that’s where it has the final numbers because everything must match to the penny and you’re going to sign this closing disclosure and three days later you’re allowed to sign the loan documents and usually either sometimes that day or usually the next day of the day after we close the loan it funds the loan we wire the money to pay it off and then the escrow and title company work together to record the loan the when’s once it’s recorded the property is now finally a hundred percent it’s your property you’re a homeowner and the next thing that happens is the realtor is going to be all excited to come and present you with the keys so you can open the door to your own home at that point we have fired your landlord that’s a big deal
#8 – Is really simple, call me.
Just call me, text me, email, or me whatever it takes call one of my assistants. We’ll get you the numbers. Really simple we sit down we go through the process if you want and you don’t have time and time is of the essence here’s what you can do. Go to the link on this website and drop me an email and together, we will FIRE YOUR LANDLORD!