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Overview of the 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. In other words, they contain information banks and lenders need to know in order to approve the loan.

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.

Here are some of the documents that may be needed for a California FHA loan:

  • 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: YTD Profit & Loss 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.

Why 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 Electronic Submission Methods

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 has been moving toward a “paperless” process for many years, and the COVID situation 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.

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 start off by getting pre-approved for an FHA loan. This gives them a specific price range that can be used to narrow the home search, paving the way for a more efficient house-hunting process.

From there, 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

As mentioned above, additional documents might be needed throughout the FHA loan  process. For instance, the underwriter might request a letter of explanation for a particular bank transaction or gap in employment.

Questions? Bridgepoint Funding is located in the San Francisco Bay Area but serves the entire state of California. We offer a broad range of financing options, including conventional, FHA and VA home loans. Please contact us if you have mortgage-related questions or would like to apply for a loan.

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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