Overview of Documents Needed for an FHA Loan in California

This article explains some of the documents that are needed for an FHA loan in California. Commonly requested items include W-2 forms and tax returns for the past couple of years, pay stubs, bank statements, and other financial documents.

The FHA loan program is popular among California home buyers who can’t afford to put a lot of money down. These loans offer a minimum down payment as low as 3.5%, for eligible borrowers. They can also be easier to obtain, when compared to a conventional or “regular” mortgage loan.

Like all mortgage products, California FHA loans require certain documents from the borrower. Most of these documents relate to the borrower’s income, assets, debts and employment status.

Documents Needed for an FHA Loan in California

Banks and mortgage lenders request a variety of financial documents when considering mortgage applicants.

They use these documents for various purposes, but mainly to determine if the borrower is a good candidate for financing. These “loan docs” also help lenders ensure that a person can afford to repay the debt.

• W2 statements (or 1099 income statements) for the last two years
• Federal tax returns for the last two years
• Bank statements for the last few months
• Recent pay stubs and proof of other income
• Proof of investment income you’re currently receiving (if applicable)
• For self-employed: Year-to-date profit and loss (P&L) statements
• Form HUD-92900-A (Addendum to Uniform Residential Loan Application)
• Divorce, alimony or child support papers
• Driver’s license or other government-issued ID

This is just a standard list of documents needed for FHA loan pre-approval, underwriting and approval. Additional items might be required in certain cases.

For example, if you currently generate income from an investment / rental property, you might have to provide documents relating to that property.

There’s a 120-Day Rule for Most Documents

The Federal Housing Administration (FHA) is a government agency that falls under the U.S. Department of Housing and Urban Development (HUD). So it’s HUD that establishes the rules for FHA loan document requirements in California.

In addition to requiring specific types of documents from borrowers, HUD also imposes a 120-day expiration rule. The short version is that most of the documents used for FHA mortgage application and underwriting cannot be older than 120 days when the funds are disbursed.

The first mention of a 120-day rule occurs in Part II, Section A-1 of HUD Handbook 4000.1 (a.k.a., the Single Family Housing Policy Handbook). This is the official handbook for the FHA loan program.

In that section, we find the following requirement for mortgage documents:

In this context, the “disbursement date” refers to the day the mortgage funds are officially released to complete the home purchase or refinance transaction. This is typically the date when the lender sends the loan amount to the escrow or title company to finalize the transaction.

Home appraisals are the one major exception to the 120-day rule. For California FHA loans, the initial appraisal remains valid for 180 days from the “effective date of the appraisal report.”

But aside from that, the 120-day rule applies to most FHA mortgage documents.

Why Do Lenders Need So Much Paperwork?

From a borrower’s perspective, mortgage lending can often be a streamlined, straightforward process. That’s the best-case scenario anyway. But if you look “behind the scenes,” you’ll realize the mortgage process involves a lot of different individuals, companies, and procedures.

This is why banks and lenders require so many documents. They need to verify the borrower’s identity, income situation, employment, debts, and past borrowing history. In short, there are many things that require review and verification, and therefore a lot of documents that are required.

This is true for FHA, VA, and conventional mortgage loans. In fact, the documentation requirements for these different loan programs and products overlap for the most part.

DocuSign and Other E-Signature Tools

Now you know which documents are required for an FHA loan in California. But what about the method of submission? How do you actually deliver these items?

First the good news: Many of the documents needed for an FHA-insured mortgage loan can be submitted electronically. The mortgage industry had been moving toward a “paperless” process for many years, and the COVID pandemic gave it a major push.

Today, most of the documents needed for an FHA loan in California can be signed and submitted through DocuSign or other “electronic agreement” programs. In addition to simplifying the paperwork-gathering process, these digital procedures can shorten the time it takes to get from application to the final closing.

Best Practices for Submitting Documents

The document submission process is fairly straightforward. Your lender will give you a list of required items and acceptable formats, and you’ll gather them up and deliver them.

Even so, there are some proactive steps you can take to ensure success and prevent unwanted delays.

• Submit recent documents: Ensure that financial documents like pay stubs and bank statements cover the period required by your lender, which is usually the past 30-60 days.
• Ensure consistency: Double-check that your income, assets, and employment details match across all submitted documents. Discrepancies between documents could trigger additional requests.
• Complete all forms and signatures: Carefully fill out required forms, like the Uniform Residential Loan Application (URLA). Make sure all necessary signatures have been included.
• Submit high-quality copies: Use a scanner or app to provide legible, high-resolution copies of your documents to avoid delays. Illegible or blurry documents could delay the process.
• Include all pages of statements: Provide complete bank statements, even if some pages seem irrelevant. Lenders need all pages to conduct a thorough review.
• Explain large transactions: Be proactive in explaining any large deposits or withdrawals from your bank account. Doing this upfront could help to expedite the underwriting process.
• Stay in touch: Respond quickly to any requests for additional documents or clarification. Keep in close contact with your mortgage company point of contact throughout this process.

When it comes to FHA loan documents, details matter. So pay close attention when preparing and delivering financial documents to your lender. This kind of diligence can save time and prevent unnecessary delays.

The Broader Path to FHA Loan Approval

Many of the FHA loan documents mentioned above are gathered on the front end of the process, when the borrower submits a mortgage application.

In this context, the “application” refers to the Uniform Residential Loan Application (URLA). This standardized document is used for nearly all mortgage loans, including both conventional and government-backed mortgage products.

Most borrowers in California start off by getting pre-approved for an FHA loan. This gives them a specific price range to work with, for a more focused and efficient house-hunting process.

After pre-approval, the rest of the process usually goes like this:

1. The buyer makes an offer to purchase a home
2. Seller and buyer agree on the price and other terms of the sale
3. The lender receives a copy of the purchase agreement
4. The underwriter reviews all loan documents (and may request additional docs)
5. The buyer attends closing (virtually or in person) to sign finalized documents