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Smart borrowers take plenty of time to plan their new home purchase. It’s important to set budget, examine credit scores and reports, save up money for a down payment, plus the fees and expenses required as part of getting the loan.

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The Path to Homeownership
FHA.com is a private company, is not a government agency, and does not make loans.

FHA Loan Articles

News and Updates for Homeowners

Get Ready for an FHA Loan Application

November 16, 2015 - Home loans don’t happen instantly. Smart borrowers take plenty of time to plan their new home purchase. It’s important to set budget, examine credit scores and reports, save up money for a down payment, plus the fees and expenses required as part of getting the loan. Do you know how much you’ll have to pay for the appraisal? Do you need a flood zone determination or a termite inspection? Just a few of the things to consider when thinking about your finances on the road to your closing date.

Some are brand new to the home buying process and might not know where to start. In cases like these, it may be best to start by figuring out how much home you can afford with your present income, debts and financial obligations.

You can use an online calculator to figure these things out--a very helpful tool to begin your journey to home ownership. It’s easy to lose sight of some realities of the home loan process--the amount of the loan you might qualify for and the amount of mortgage payment you can actually afford may be two different things. Many online home loan tools include multiple calculators for specific purposes to give the potential borrower a better perspective on the costs and planning required for the application.

Do you know how much is “just enough” for a monthly mortgage payment in terms of affordability? How about the total amount of the monthly obligation? There are a variety of factors that can change that monthly amount: the down payment, interest rates, the term of your loan and other factors.

Another step in the preparation process: anticipate fees and expenses associated with the home buying process. You may be required to pay for appraisals as well as compliance inspections should the appraisal turn up things that need to be corrected or repaired as a condition of the loan.

We mentioned the FHA loan down payment earlier--this is another area borrowers will need to prepare for as there is no “zero money down” option for an FHA home loan. Your down payment is mandatory and is basically a minimum of 3.5%.

It’s crucial to understand that the down payment is a completely separate expense. Other fees and expenses may not be used toward the down payment. Saving up for this expense is quite important, and all borrowers are required to document the sources of their down payment funds–you can’t use cash advances from credit cards, payday loans, or other “non-collateralized” types of loans to make your down payment.

Knowing about these expenses and saving for them is a big part of being a well-prepared borrower. Most industry professionals agree, you should take at least 12 months to save and get ready for your home loan application in order to come to the bargaining table ready to buy.