Over the past few years, drastic changes in the mortgage market have made it harder to get a loan.  The process for approval of a conventional loan includes great credit scores, a lot of documentation, high-income levels and the ability to put down 20 percent. However, thanks to the Federal Housing Administration, it’s not completely out of the question to work towards buying your first home.

The FHA plays a key role in the real estate arena today, and many more families are starting to rely on FHA loans to purchase a new home. Why?

The FHA guarantees the loan in the event a borrower defaults.  Lenders find that to be very appealing and are more likely to give out the loan.
In addition, these loans guarantee a considerably lower down payment than most conventional loans.  With a down payment as low as 3.5 percent, low to middle income families are far more successful in gathering the needed funds for their new home.  Even more attractive is the FHA loan program does not restrict the use of gifted or borrowed money towards the down payment.  So, people receiving start up funds from their parents, aunt, uncle or whoever will not be turned down.
With lower closing costs, less strict qualifying standards and no income limits, that is why the FHA loan is becoming one of America’s favorite government-backed mortgage plans.

The Process of Obtaining Your FHA loan
In order to qualify for the loan, you will need a decent credit rating.  So, you made some past financial blunders, many lenders are willing to work with you because of the FHA’s insurance on the loan.  Improving your credit score to the standards of the FHA program will be a lot easier than the 700 and over credit rating required by conventional loans.
Also expected is a reasonable debt to income ratio.  Although, there are no income limits, a family must exhibit the ability to handle past and possible future debt.
Last, but not least, is the application process.  There is a lot of paperwork involved with the loan application.  You will need:
• A listing of past and current addresses.
• All of your employers’ names and addresses for the last two years.
• The amount of your monthly grossed salary
• Your W2s for the past two years
• Your income tax returns for the last two years

Note that if you’re a veteran, you will be required to submit a DD Form 214 or an official Armed Forces discharge paperwork and the FHA loan application.
Make the process easier for yourself and have all the proper paperwork before starting the application.

It’s All Too Good to be True
Before deciding on any loan, great thought is suggested.  The FHA loan is not suited for everyone, especially people with super good credit.  If you have excellent credit, you could probably end up paying less with a conventional loan.
A couple of other not so great things about the FHA loan…
• There is limit own how much you could receive, depending on where the house you want buy is located.

• As of April 5, 2010, the upfront mortgage insurance payment (UFMIP) was raised from 1.50 percent to 2.25 percent of the loan amount.  That insurance payment is due at the time of settlement.

So, sit down with your family and a mortgage lender today to look over your options.