How to Apply for an FHA Loan: The Mortgage Application Process Explained

The 2024 FHA Loan Handbook
  • This article explains how to apply for an FHA loan, step by step.
  • The application process is basically the same as a regular mortgage.
  • You’ll submit a form known as the Uniform Residential Loan Application.
  • You’ll provide a variety of documents relating to your income and debts.
  • You have to apply through a HUD-approved mortgage lender.
  • These days, the entire process can be handled electronically.

In this article, you’ll learn how to apply for an FHA loan and navigate the application process, step by step. We will also cover some of the preliminary steps you can take before applying for a loan, as well as the mortgage processing steps that come after it.

An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). This program is designed to make homeownership more accessible to a wider range of borrowers, particularly those with lower credit scores and smaller down payments.

To apply for an FHA loan, a borrower must have a credit score of at least 580 and a down payment of 3.5%. You also need to have a manageable level of debt and a steady income stream sufficient to repay the loan.

The actual funding comes from a mortgage lender in the private sector, the same as any other type of home loan. But what makes this program different is that the loan gets insured by the federal government, giving the lender and added layer of protection. This insurance allows lenders to offer more flexible qualification criteria to borrowers.

So even though it’s considered a “government mortgage program,” you’ll apply for an FHA loan through a regular mortgage lender. What does the application process involve? Let’s explore!

How to Apply for an FHA Loan

The FHA loan application itself is fairly straightforward. It’s actually the same form used for other types of mortgages, including conventional and VA home loans. It’s known as the “Uniform Residential Loan Application,” or URLA. You can find an example of one online, just by googling it.

The FHA loan program is managed by the Department of Housing and Urban Development (HUD). Here’s what it says about FHA loan applications on the HUD website:

“All borrowers applying for the mortgage and assuming responsibility for the debt must sign Fannie Mae Form 1003, Uniform Residential Loan Application (URLA), and all addenda.”

Steps in the Application and Approval Process

We will talk more about how to apply for an FHA loan in a moment. But first, let’s put the application process into a broader context. Here are the basic steps that take place when you use an FHA loan to finance a home purchase.

  1. Pre-approval: Before you officially apply for an FHA loan, you may want to consider getting pre-approved. This will give you a better idea of how much you can afford to borrow and may make the application process smoother.
  2. Application: Once you’re ready to apply for the loan, you’ll need to complete the standard loan application mentioned above. Your lender might offer online application tools to streamline and simplify the process.
  3. Underwriting: After you submit your loan application, your lender will begin the mortgage underwriting process. This involves reviewing your credit history, employment status, income, and other financial information to determine whether you’re a good candidate for an FHA loan.
  4. Appraisal: Your lender will also order an appraisal of the property you’re planning to purchase. They do this to ensure that the property is worth the amount you’re borrowing, and that it meets FHA’s minimum property standards.
  5. Loan approval: If you meet all the eligibility requirements and your application is approved, you’ll receive a loan approval letter from your lender. This will outline the terms of the loan, including the interest rate, amount being borrowed, and repayment schedule.
  6. Closing: The final step in the process is closing on your FHA loan. This typically involves signing a lot of paperwork and paying closing costs. But once it’s done, you’ll officially be a homeowner!

Start to finish, this process can take anywhere from 30 to 40 days on average. Be sure to stay in touch with your loan officer during this time, and provide any information they need in a timely fashion.

Now that you understand the broader process, let’s examine the specific steps that occurr during the application stage.

Step 1: Find an FHA-Approved Lender

To apply for an FHA loan, you’ll need to work with an FHA-approved lender. These lenders have been approved by HUD to participate in the program and can guide you through the application process.

To find an FHA-approved lender in your area, you can search the HUD website or use the FHA’s lender search tool. You could also use a mortgage lender directory like the one offered by Zillow. Once you have a list of potential lenders, you’ll want to compare their rates, fees, and services to find the one that’s right for you.

Step 2: Gather Documentation

The next step in the application process is to gather the documentation you’ll need to apply for an FHA loan. Here’s a list of commonly requested documents:

  • Proof of income: This includes recent pay stubs, W-2s, and tax returns for the past two years.
  • Proof of employment: This includes a verification of employment form from your employer.
  • Bank statements: You’ll need to provide statements for all bank accounts you have, including checking, savings, and investment accounts, for the past two to three months.
  • ID and proof of residency: You’ll need to provide a copy of your driver’s license or other government-issued ID, as well as a utility bill or other proof of residency.

Depending on your situation, you might have to provide additional documents as well. Your lender should provide you with a complete list of required documentation when you apply for an FHA loan.

Step 3: Submit Your Application

Now that you’ve determined your eligibility, found an FHA-approved lender, and gathered all the necessary documentation, you’re ready to actually apply for an FHA loan. This is the final step in the application process, before you move on to the underwriting stage.

The mortgage application form requires a lot of information about you, including your employment and income. It also asks for information about the property, which can be filled in later once you have identified a home to purchase.

Here’s a step-by-step guide to completing the FHA loan application:

  • Personal Information: Be sure to use your legal name and provide your current address and contact information. If you’ve lived at your current address for less than two years, you’ll also need to provide information about your previous address.
  • Property Information: You’ll need to provide the street address for the property you are buying, the purchase price, and the type of property it is (e.g. single-family home, condo, townhouse, etc.). You’ll also need to indicate whether you’ll be using the property as your primary residence, a vacation home, or an investment property.
  • Employment and Income Information: You’ll need to provide details about your current employment status, job title, and the name and contact information of your employer. You’ll also need to provide information about your income, including your gross monthly income, any bonuses or commissions you receive, and any other sources of income.
  • Assets and Debts: You’ll need to provide information about your assets. This includes the amount of money you have in savings and checking accounts, investments like stocks or mutual funds, and the value of any real estate you own. You’ll also need to provide information about your debts (credit card balances, car loans, student loans, etc.).
  • Loan Information: You’ll need to specify the amount you’re requesting to borrow, the type of loan you’re applying for (such as a 30-year fixed-rate mortgage), and the intended use of the loan (e.g. purchase, refinance, etc.). You’ll also need to provide information about any down payment you’ll be making and any other fees or costs associated with the loan.

Mistakes to Avoid When Filling Out the Application

That covers the basic steps in the application process. Now, let’s talk about how to apply for an FHA loan the right way, by avoiding common mistakes and pitfalls.

  • Provide accurate and complete information: One of the most important things you can do when filling out the application is to provide accurate and complete information. Double-check all the details before submitting your application to avoid delays or rejections.
  • Be honest: It’s important to be honest when filling out the application. Lying or misrepresenting your financial situation can have serious consequences down the road, including loan denial or even legal trouble.
  • Don’t leave any fields blank: Leaving fields blank on the application can slow down the process and create confusion for your lender. Even if a field doesn’t seem relevant to your situation, fill it in with “N/A” or “not applicable” to ensure that all the required fields are complete.
  • Provide all required documentation: As mentioned earlier, you’ll need to provide various documents to support your application. Make sure you have everything organized and ready to go to avoid delays or confusion.
  • Follow up with your lender: Once you’ve submitted your application, follow up with your lender regularly to check on the status of your application. You should have a point of contact at this point, such as a mortgage broker or loan officer. Be sure they have all of the information they need to process your application.
  • Be patient: Applying for an FHA loan can be a lengthy process, so it’s important to be patient and stay in communication with your lender throughout the process.

Submitting Loan Documents Electronically

From a technological standpoint, the mortgage industry has changed a lot over the past few years. The COVID pandemic had a lot to do with this.

Before the pandemic, mortgage companies were already moving toward a paperless, electronic application process. COVID accelerated those efforts, by forcing mortgage companies to adopt those procedures.

Today, borrowers can apply for an FHA loan by submitting documents electronically, as opposed to mailing or hand-delivering hardcopies. So let’s wrap up this article by talking about electronic document submission during the FHA application process.

Electronic documents are digital versions of paper documents that can be accessed and signed online. They allow borrowers to submit their information and documentation to their lender from anywhere with an internet connection.

Online document submission and signing tools allow borrowers to upload their documents directly to the lender’s website or application portal. They eliminate the need to print, sign, and scan paper documents. Once the documents have been uploaded, borrowers can sign them electronically using a secure e-signature platform.

Using electronic documents can help home buyers save time and avoid the hassle of faxing or mailing paper documents back and forth with their lender.

Electronic documents can also be completed more quickly than paper documents, since they can be signed and submitted instantly. This can be especially helpful during the underwriting process, when lenders may need additional documentation to verify a borrower’s income, employment, or assets.

How to submit electronic documents when applying for an FHA loan:

  1. Check with your lender to make sure they accept electronic submissions and to find out what their preferred method of submission is.
  2. Scan each document or take a clear photo of it using your smartphone.
  3. Save each document as a PDF file or image file (such as JPEG) and make sure it’s readable.
  4. Log in to your lender’s website or application portal and follow the prompts to upload and submit your documents.
  5. Sign your documents electronically using a secure e-signature platform.
  6. Confirm with your lender that they have received them and that they are complete.

This process can vary slightly from one mortgage company to the next. But it usually follows the steps and sequence outlined above.

Note: This article explains how to apply for an FHA loan, including all of the common steps and requirements for the application process. This information has been provided for a general audience and might not apply to your specific situation. We encourage you to continue your research beyond this website and to contact a reputable, HUD-approved mortgage lender with any questions you have.