How Do I Get an FHA Loan?

As one of the most popular loans for first-time homebuyers and repeat buyers from low-to-moderate income households, we get a ton of questions about FHA loans. Who are they for? What does my credit score need to be? How do I apply for one? 

All of these questions will be answered in this article, but it’s important to speak with a qualified lender in order to get more specific, personalized information.

FHA loans were created by the Federal Housing Administration and is backed by the government. This means there are a few more hoops to jump through during the application process. For instance, homes sold to homebuyers with an FHA loan must meet certain requirements to ensure the safety of the new homeowner. Are you looking for a fixer-upper? An FHA loan may not work for you depending on the level of disarray the home is in. On the other hand, government-backed loans are meant for buyers with relatively low incomes so qualifications are much more flexible than a conventional loan.

Who is Qualified?

This loan was designed for homebuyers that will benefit from a lower down payment requirement, lower monthly premiums, and lower closing costs.

Low Down Payment – Depending on your credit score, you can get an FHA loan with as little as 3.5% down on the home. Not only does this save you thousands up front, but it may help you purchase a home on the upper end of your budget.

Low Credit Requirements – One of the most flexible loans when it comes to credit score, an FHA loan can be granted by some lenders with a credit score of 500. Most lenders, though, require a score of 580 at least. With credit scores under 620, homebuyers may have to provide extra money on a down payment.

High Debt-to-Income Ratio – Your DTI measures how much debt you currently have against how much money you bring home every month. For most loans, you want your DTI to be offset with more income than debt. Somewhere between 35%-49% DTI is ideal for a conventional loan. With FHA loans, however, some lenders may allow you to go up to 59%.

What are the Steps?

Step One: Apply for a pre-approval letter online. A pre-approval letter will help you narrow down homes in your budget and will let sellers know that you are a stable buyer.

Step Two: Send in your documents. You’ll need several documents for an official loan approval: state issued ID, tax records, and banking statements are among these. This can be done in person, but at Ruoff, we are able to pull much of this information automatically for you.

Step Three: Lock in your rate. Once you application is officially approved, your loan officer can lock in the best interest rate for you. So, even if interest rates rise between then and closing, your rate stays the same.

Step Four: Receive updates and stay connected. Your loan officer should be in constant communication with you to inform you of next steps and what information they need from you to move forward. At Ruoff, we do this through real-time Milestone Updates that can be sent to you, your co-borrowers, and even your real estate agent.

Step Five: Review and sign documents. Prior to closing, you will be able to sign much of your paperwork. While most lenders still require this in-person, at Ruoff, you can review the majority your documents and forms online and securely e-sign them without ever having to leave your couch.

Step Six: Head to the closing table. It’s time to get the keys to your new home! With Ruoff’s Digital Closing Experience, you’ll only spend about 10 minutes at the closing table (instead of hours) because you’ll only need to physically sign a few forms.

Because Ruoff prioritizes our customer’s confidence in the homebuying journey, we walk by your side every step of the way. By explaining the process, answering questions, and freely sharing knowledge, we hope to encourage this confidence. As you work your way through getting an FHA loan, your Ruoff loan officer will make sure everything is on track and everything goes smoothly.