February 17, 2014
When you fill out and submit an FHA loan application, there are a number of steps the lender will take to process your application. Borrowers want to know how long the application review process takes and the answer can vary depending on the lender’s workload, the amount of information that needs to be verified and reviewed, etc. Some borrowers hope for an answer on their FHA loan application in a matter of days, but this isn’t possible–it takes weeks, not days, to verify all the information on your application.
One reason for this is the rules the lender is required to observe when verifying employment and credit details. Did you know the lender cannot accept credit reports and similar documents from third parties? FHA loan rules say the lender must contact the credit reporting agencies directly for this information–it cannot come from the borrower or other “interested parties” such as the seller.
HUD 4155.1 Chapter One, Section B under “General Documentation Standards” says:
“Lenders may not accept or use documents relating to the credit, employment, or income of borrowers that have been handled by, or transmitted from or through the equipment of interested third parties, such as
• real estate agents
• builders, or
• sellers”
This is one reason why the application review process takes weeks instead of days–the lender must request the information, the agencies must locate and transmit it back to the lender, then the lender has to review it. Borrowers should not expect this process to move quickly–in order for the process to be thorough, it takes time. FHA loan rules place additional documentation requirements on the lender–an incomplete package of documentation won’t do. According to HUD 4155.1:
“The mortgage loan application package must contain all documentation that supports the lender’s decision to approve the mortgage loan. When standard documentation does not provide enough information to support the approval decision, the lender must provide additional, explanatory statements that are consistent with information in the application. The explanatory statements must clarify or supplement the documentation submitted by the borrower.”
It’s easy to see from these rules that the FHA loan process will take time, but going into the process knowing this makes the wait much easier once your FHA loan application has been submitted.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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