September 28, 2018
There are many questions borrowers have about home loan approval and how the lender decides which loans to approve. Knowing more about this process can help you better prepare for it; here are some of the most commonly asked questions about FHA home loan approval.
Why Does My FHA Loan Application Get Denied With One Lender But Approved By Another?
FHA home loan rules include minimum standards for FICO scores, credit history, and other factors. But these minimums are not the only guidelines that affect home loan approval.
Your FHA mortgage loan is also subject to lender standards which will vary from lender to lender but also may be different than FHA loan minimums. FICO scores, employment history, and other factors may vary from the FHA minimums, which is permitted as long as those variations are in compliance with federal law.
That means shopping around for a participating FHA lender is a very good idea-you want to find the lender with the most favorable terms and conditions including the interest rate offered you based on your financial qualifications such as FICO scores, etc.
One lender could offer you a much more competitive rate than another based on lender requirements and how they vary from company to company. Don’t underestimate the power of competition in the lending marketplace.
You may discover one lender is having a special deal for certain types of loan transactions, or that your status with a particular lender as a repeat customer (where applicable) provides some form of benefit to you as a house hunter looking for the best home loan possible.
I Got Pre-Approved For An FHA Mortgage. Does That Mean My Loan Is Already Approved?
Pre-approval is not the same as the lender’s final home loan approval. Getting pre-approved means your basic credit details and income have met a certain threshold required by FHA loan rules. It also has the effect of having sellers perceive you as a more serious buyer.
Pre-approval may not be final loan approval, but it is a process worth looking into to get established with a lender and be taken seriously in the housing market.
I Got Approved For My FHA Mortgage Loan. I Can Stop Worrying Now, Right?
Borrowers need to understand that the lender will monitor a borrower’s credit during the mortgage loan process. If your credit changes in the course of the purchase process, the lender is required to re-evaluate your ability to afford the loan, make sure the credit changes aren’t the result of trying to use unapproved income or funding sources for down payments or other funds, etc.
The lender can and likely has in the past cancelled loans if the borrower’s debt ratio or credit lines change dramatically before loan closing. It is best to follow all the advice you took leading up to the loan about not opening new credit, keeping your debt ratios low, and avoiding the temptation to use your existing credit accounts and push your balances higher.
“Better safe than sorry” is good advice to take until you get your keys and move into your new home.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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