If you are planning to buy your first home but have little in the way of a down payment or reserves, an FHA loan may be a key to turning you into a homeowner. A government-backed FHA loan can be especially helpful for the first-time home buyer because it requires a much smaller down payment than most conventional loan products, plus it is fairly easy to qualify for one. Let’s look at the process for getting an FHA loan in Georgia.
Get your finances in order
To qualify for an FHA loan, you’ll need to meet some basic financial and credit requirements. Specifics may vary according to the lender, but here are the general benchmarks:
- You need to show two years of stable work history
- You need a bit of money in the bank to cover down payment and closing costs (FHA loans require a down payment of 3.5 percent of the loan)
- You need a credit score of 620 or higher
- You need a debt-to-income ratio lower than 45 percent
To prove your income, a lender will ask for two or three years of tax returns and probably several months of pay stubs and bank statements — so go ahead and assemble these items before approaching the lender. You should also pull your own credit report (you’re allowed one free report per year from each of the three reporting agencies: Equifax, Experian, and TransUnion) to make sure your credit score and debt-to-income ratio are in acceptable limits. If you discover any problems or errors on your credit report, try to get these fixed. If you are carrying a lot of debt (even if your score is generally good), try paying some of this debt off before applying to improve your chances of acceptance.
Get pre-qualified or pre-approved
Once you have your paperwork in order, you’ll want to approach a mortgage company or lender who handles FHA loans and get a pre-qualification or pre-approval letter before starting your home search. This tells you how much home you’re qualified to buy, and it also proves to sellers you’re a serious candidate.
Apply for the loan
When you find the home you want and make your offer, loan processing begins in earnest. Your lender may pull a more extensive credit report and ask you for more detailed info about your finances, employment, etc. Don’t be surprised to get several phone calls along the way asking for more details here and there; it’s all part of the process.
Keep the status quo until you close
Once the loan is in process, avoid making any huge purchases or applying for any more credit. Your lender will pull a final credit report a few days before closing to make sure nothing has changed in your financial status. Any significant increases in your debt or credit score could delay or derail the process.
When you are ready to shop for your first home in Atlanta, our team of experts is here to help! Give Atlanta Fine Homes Sotheby’s International Realty a call at 404.948.4812.