How to Apply for a Federal Mortgage

Published on Oct 18, 2013 06:00 am

Unless you’ve saved a significant amount of cash, you likely need a loan to help pay for your new home. But the Catch-22 with many loans is that the more you actually need the money, the less likely you are to qualify.

If you have a limited or troubled credit report, or this is your first home mortgage loan, applying for federal backing might be the answer. The Federal Housing Authority (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), approves and insures loans by authorized lenders that offer more accessible financing for certain borrowers, including first-time homeowners.

Step 1Check your credit score well in advance of your application so you have time to work on any problem areas and work to change any behaviors, if necessary. According to HUD, the information included in your credit report is an important factor in determining whether or not you can qualify for an FHA loan, and if you can, what interest rate you’ll have to pay. A higher score generally leads to lower rates.

Step 2Calculate how much home you will likely qualify for to ensure you can afford the monthly payments. Even with a federally backed mortgage loan, you’ll still run into trouble if you can’t make the required payments. Your income, monthly expenses, and the amount of money you can put down all play a role in determining how much you can safely afford to pay for a home. Your credit score and interest rate can affect how much you’ll have to pay monthly and are vitally important.

Step 3Understand the terms of a federally backed FHA mortgage. Whereas traditional loans require down payments of at least 10 to 20 percent, you can get an FHA-backed loan for a down payment of as little as 3.5 percent of the purchase price. If your credit report turns up late payments or collections, you may still qualify for an FHA loan. Even a bankruptcy won’t automatically disqualify you from an FHA loan, as long as your debt discharge is at least two years old. Of course, you’ll still have to show responsible credit behavior, along with a stable job and improved finances, to obtain a mortgage.

Step 4Provide the loan officer at a federally approved lending institution with relevant financial information. The officer will typically ask for your addresses and employers for the past two years, your Social Security number, and your gross monthly salary. You’ll also need a complete financial summary, including information on checking and savings accounts, investments, and the value of all of your property. The information on your credit report, whether provided by you or pulled directly by the lending institution, is another crucial piece of the loan puzzle.

About the Author
John Csiszar began writing in 1989 and his work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any egal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2013, Inc.  All rights reserved.

More like this