If you can’t afford a 20 percent down payment on your house, expect higher rates of interest, says Lending Tree. If you have that much of your own money invested, mortgage bankers think you’ll be hesitant to lose it by defaulting. If you can’t manage 20 percentage, however, the Federal Housing Administration will help. The FHA insures mortgages, providing qualified creditors the freedom to accept as little as 3.5 percent without jacking up rates.
Prove you can afford the payments. As with any other mortgage loan, you’ll need to present evidence of employment, monthly income (W-2 forms and pay stubs) and debts, such as credit card debts, student loans or child support payments. With traditional mortgages, lenders want your monthly debt burden –including mortgage payment, taxes and insurance–to complete below 36 percent. With FHA insurance, it can be as high as 41 percent.
Pay for an appraiser to inspect the house you’re buying. Lenders normally insist on an appraisal to be certain a house is worth the mortgage. With an FHA loan, the appraiser must also check to be certain that the house meets FHA standards. The FHA inspection checklist consists of such things as non-functioning toilets, cracks in walls or foundations, and wiring which gives off sparks. If these problems are located, the vendor must fix them until the final or the FHA will refuse to participate.
Bring a cashier’s check to the final, along with identification and evidence of insurance. The check must be big enough to cover the down payment and the closing costs, which generally include appraisal fees, application fees, title insurance and prepaid interest, also called”points” Even if your lender takes a personal check, the Keystone Bankers Mortgage Co. says, he will hold off on closing until the check clears your bank.
Read the loan documents. Truth-in-lending laws need your lender give you a good faith estimate of charges, points and interest prior to the closure. Keystone advises that you read everything to make sure that the figures haven’t been raised. Once you’re satisfied, sign the loan documents. The creditor’s closing attorney will file them with the deed to the house in the county recorder’s office.