How To Apply for an FHA loan – Construction and Land Loans

FHA, otherwise known as the Federal Housing Administration, is the largest mortgage insurer in the world, which provides lenders with protection against defaults. FHA was created to make the property available and affordable for low-income families. FHA loans require only a 3% down payment which makes them a very attractive alternative for homeowners to do. They can also be used in conjunction with state obligations and subsidies. Another advantage is that they do not allow a lender to charge unnecessary fees.

Things you need

  • Bank statements
  • Pay slips
  • W2 and / or tax returns
  • Alien License and / or Permanent Resident Driver Card

Required Documentation.

Gather the last two months of bank statements, pay stubs and any other assets you may have, including pension plans. You must have a valid Social Security number, driver’s license and / or a valid Alien and Permanent Resident Card update, if applicable. Your lender will need to make copies of these.

While excellent credit rating is not a mandatory factor of FHA construction loans is always wise to make credit repairs in advance to apply for an FHA loan is will help speed up the process.

You will need at least two years of W2 and may even need to file income tax returns. If you do not have them available, contact your local IRS office who can send you transcripts of these documents.

If so, have divorce papers, settlement agreements , and child support orders ready. The lender will require copies of all these documents, which are necessary to calculate your debt in relation to income.

When you have gathered all this documentation, you are ready to apply for an FHA loan an approved FHA lender.

A way to analyze how a good deal PMO you will need to wage if you go with an FHA mortgage

Domestic shoppers the usage of FHA financing can pay two styles of loan coverage costs. The FHA makes use of the acronym MIP in place of PMI – personal mortgage insurance – that used for distinctive styles of mortgages. The talents of MIP and PMI are the same: to protect the lender in competition to losses in the event of house owners defaulting at the mortgage.

Determine an initial amount of the loan. Subtract the amount of the deposit on the price of the house. The minimum payment of funds for an FHA loan is 3.5 percent of the purchase price. To use the low minimum payment, multiply the home price time by 96.5 percent for the original loan amount. For example, on a $ 200,000 home purchase, the maximum loan amount of FHA construction loans $ 193,000.

Calculate the advance mortgage loan insurance premium from the FHA by growing the first few hours of loan amount by 1 percent. On the ready example, the UFMIP would be $ 1930. At the end of the loan, the UFMIP can be paid in cash or rolled into the loan balance. Including the UFMIP in the loan gives a loan amount of $ 194,930 final.

Determine the yearly FHA MIO by growing the original loan total times the current yearly MIP rate. As of May 2011, the last rate hike was in April 2011 and the rate was 1.15 percent for a loan-to-value exceeding 95 percent. On the example, $ 194.930 times 1.15 percent produces an annual PIM of $ 2,241.70.

Divide the annual MIP calculated by 12 to determine how much the annual MIP adds to the monthly mortgage payment. With the example, the annual PIM amount of $ 2,241.70 results in a monthly amount of $ 186.81 from MIP.

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