FHA loans are a common source of funding not just for first-time homebuyers, but also for any homebuyer. This program offers flexible financing options and easy-to-qualify-for guidelines, making it the choice of many borrowers. Before you can secure FHA financing, though, you must find FHA-approved lenders in your area. Rather than picking up the phone and calling lender after lender, there is an easier way to find one in your area.
Finding FHA-Approved Lenders
First and foremost, you must know that FHA-approved lenders are the only lenders able to provide FHA financing. If a lender does not have the seal of approval from the FHA, they are not entitled to provide you with this type of financing. The FHA set specific guidelines that each lender must pass in order to receive approval. The lenders must complete an online application and go through the approval process to receive the okay to provide FHA loans.
In order to play it safe, you can use the HUD website which offers a search tool to help you find lenders approved to provide FHA loans. This way you know that the lender you apply with can, in fact, provide you with an FHA loan. This tool is simple to use. It allows you to enter a variety of information including:
- Lender name
- Zip Code
- Insurance Type
To simplify matters, however, you can supply just your city and state to get a listing of all of the FHA-approved lenders in your area. If you wish to expand your search, you can check the surrounding towns around you so that you can comparison shop with several lenders if you want to shop around.
Shopping around with Different Lenders
Once you have your list from HUD, you can start to shop around. Shopping around enables you to ensure the terms, interest rate, and fees a lender quotes you are comparable to others in the area. Some lenders have more leniency and offer better terms than others do, which is why using the list and calling around can be very beneficial for you.
When you find the list of approved lenders in your area or near your area, do your research. You can start with the Better Business Bureau to ensure that the company does not have a lot of complaints or a poor rating. You can also do a quick search online to see if there are numerous complaints about the lender. This way you can know ahead of time who is and who is not worth working with rather than taking the chance of getting taken advantage of in the process.
Once you have a list of 3 or more lenders, you can start the application process. You will need to provide each lender with your personal identifying information as well as your financial information. If you apply with the different lenders within a short amount of time, your credit score will not be hit by multiple inquiries, which enables you to really shop around.
The lenders will run your credit, look at your income, debts, and assets and determine your eligibility for an FHA loan. Within 3 days of the application, you should receive a Good Faith Estimate from each lender. This is the document you can use to compare the costs and APR for the loan to determine which lender offers you the best deal. Once you choose a lender, you should secure a preapproval letter so that you can start shopping for your home!
Finding and shopping with FHA-approved lenders in your area does require a little legwork, but in the end, it is worth it. Once you know you have a lender that can provide FHA loans, you can find out how they will change you and what types of terms they will provide. Because it is the lender that provides the funds and not the FHA, each lender can have different terms despite using the same program as other lenders. Some lenders have lenient credit score and debt ratio guidelines, for example, while others stick to the more stringent guidelines to reduce losing money on defaulted loans.
Do your due diligence and shop around so that you can secure the best deal on your FHA loan!