A number of factors must be carefully weighed before you begin scouting for your dream home – one of these factors is loan pre-qualification.

The Advantages of Loan Pre-Qualification for a FHA 203k Loan:

• You’ll have a clear idea about the property you can comfortably afford
• The needed down payment amount for loan approval
• Makes the underwriting and final approval easy

Before beginning your home search, you should first get pre-qualified for a home loan from a reliable FHA-approved lender who specializes in renovation lending.

Not all lenders are able to do FHA loans, and even fewer are able to do FHA 203k loans. Most lenders today don’t offer the program, so simply calling your local bank may not be the best answer. You’ll want to work with a specialist who really works with renovation loans.

Picking The Right 203k FHA Lender

Just as any other product or service you buy, do your homework about the person and company you’re about to work with. If your loan officer doesn’t have experience, and the company also has little or no experience, this could be a recipe for disaster.

Make no mistake! The lender you choose for your 203k can make all the difference in your experience and in your results. At the very least, you should:

1. Get references of customers who have used the lender for a 203k loan
2. Check the better business bureau (even if they haven’t done many it’s a good policy)
3. Use other creative means of checking the loan officer and the company out
4. You can’t always avoid a potential bad experience, but doing your homework in advance will help.

Watch out for warning signs – such as:

• lender doesn’t recommend a home inspection
• lender pushes you to certain home inspection companies, contractors, or Realtors
• lender doesn’t provide “straight answers” that you can understand

Feel free to interview lenders before you apply. Interview Realtors, home inspectors, and contractors before you decide. Ask for references.

With a qualified lender’s knowledge of the mortgage market, they’ll be able to help you make an informed decision as to the type of loan you’ll want.

There are several different types of renovation loans to consider – Streamline FHA 203k,Full FHA 203k, and Conventional.

Have This Information Ready When Getting Pre-Qualified

You’ll want to have ready the following information and documents when pre-qualifying for a 203k mortgage loan:

• Your last two years work history, last 2 years W-2’s and tax returns, and 30 days worth of recent pay stubs
• If you’re on a fixed income you’ll need your awards letter and the past two years 1099’s or other confirmation of receipt of income
• Your last two years residence history, including landlord’s name and contact information
• Your banking information such as checking and savings accounts, 401k’s, stocks and bonds, or any other material assets you have
• Your social security number and date of birth
• If you’ve filed bankruptcy or been divorced, you’ll need the paperwork from these events including any child support orders
• If you have student loans that are in deferment, you’ll need confirmation that they are deferred for at least a year after your loan closes, otherwise the lender will count the student loan payment as a debt (even if it’s not yet due)

While the lenders primarily evaluate a borrower’s employment history, credit history and scores, and monthly Income and expenses, there are as many guidelines as there are individual circumstances.

This is why it is important to talk with a lender before you begin shopping to insure you’re able to qualify for the loan program. Good lenders will assist you in understanding what steps you need to take if you don’t qualify initially, so that you have the best chance of qualifying in the future.

Once all of your credit items have been provided, and all of your property repairs have been provided, and an appraisal has been delivered to the lender, your loan will be submitted to a FHA Underwriter for final approval.

Assuming the final approval is granted, your closing will be scheduled and you can begin the work after the title to the property is transferred to you.

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