There are few things more exciting than purchasing your first home. The process usually begins with a rush of excitement. Finding and touring homes and daydreaming about decor dominate the first couple weeks. Then you meet with a loan officer, and the bubble pops. The loan officer requirements seem complex and demanding, and you all the sudden begin to wonder if you were really ready in the first place.
Being prepared for the loan officer requirements and for the first meeting can make a huge difference in the way that bubble pops. In this article, we’ll provide a few tips about what to expect when meeting with the loan officer and a few tips about FHA home loans.
What to Expect at the First Meeting
Many choose to meet with a loan officer before house hunting to decide ahead of time how much they can afford. This step, called pre qualification, can save time and trouble by helping you make sure that you don’t fall in love with a house you can’t afford. Loan officer requirements for a successful first meeting might include:
- A purchase contract for the house, if you’ve already chosen one
- Bank account numbers and the address of your bank branch, plus checking and savings account statements for the last few months
- Pay stubs, W2 withholding forms, tax returns for the last two years or other proof of employment, and income verification
- Credit card bills for the last few billing periods, or canceled checks for rent or utility bill payments
- Information on other loans like car loans, furniture loans, and student loans
- If you’re self employed, balance sheets and tax returns
- Gift letters, if you’re using money from another party to help with the down payment or closing costs. Closing costs include origination fees charged by the lender, title and settlement fees, taxes, and any other prepaid items like insurance or homeowner’s association fees.
One of the most popular loan types in today’s market is the FHA loan. When the housing bubble collapsed in 2008, FHA loans surged in importance, offering higher loan limits, lower home prices, and low down payment requirements. At the first meeting with a loan officer, many will recommend FHA loans, especially to moderate income buyers who can’t afford large down payments. Here’s what you need to know:
- Know that not all FHA approved lenders offer the same interest rates and costs, even on the same loan. It is wise to shop around.
- FHA loans come with low down payments. FHA loans only require a 3.5 percent down payment and allow that down payment to come from a gift. Gifts for down payments can come from employers, relatives, or FHA down payment assistance programs.
- FHA insures mortgages, so loan officer requirements are likely to be a little more lax. The FHA doesn’t mandate a minimum credit score, so it’s up to the underwriter to determine an acceptable score and to consider a borrower’s creditworthiness in context.
- First time buyers can have non occupant co borrowers, making it easier to get a loan.
- Sellers can contribute to closing costs, paying up to six percent of the purchase price.
- Income needs to be well documented for an FHA loan in order to prove a stable source of income. The starting debt to income ratio for FHA loans is 31 to 43 percent, compared to the 28 to 36 percent offered by Fannie Mae and Freddie Mac.
Knowing your stuff before a first meeting with a loan officer can help the process to go more smoothly and can help reduce feelings of frustration. Stay informed and be prepared! Continue.