July 8, 2015
You found the home you want to purchase with an FHA mortgage, you found a lender and got loan approval. Once the closing date has been set, you’re almost finished with your journey to home ownership. But what are the rules for FHA loan closing?
FHA loan policies are spelled out for nearly every single step of the FHA loan process, so it’s no surprise that the FHA loan rulebook HUD 4155.2 would have some guidance for the lender about closing the deal.
We find this guidance in Chapter Six, which starts out stating that the lender is responsible for:
–resolving all problems regarding title to the real estate
–reviewing all documents to ensure compliance with all conditions of the commitment
–closing the loan before the expiration of the FHA-issued Firm Commitment or Direct Endorsement (DE) approval, and credit documents
–submitting the loan documents for insurance within 60 days of loan closing or funds disbursement, whichever is later.
Chapter Six also includes a specific definition of what the FHA considers a “loan closing date”:
“The date of closing/settlement is generally considered the date on which the note and mortgage are signed by the borrower. This is also the date defined as the settlement date on the HUD-1 Settlement Statement. However, the 60-day endorsement submission clock begins on the date that the lender relinquishes control of the loan proceeds (disburses the mortgage funds), for both purchase money mortgages and refinance transactions.”
Some borrowers want to know if they can assign power of attorney to another person to represent them at loan closing time. FHA loan rules in Chapter Six permit this under certain conditions:
“A borrower may designate an attorney-in-fact to use a power of attorney to sign documents on his/her behalf at closing, including page four of form HUD-92900-A, Addendum to the Uniform Residential Loan Application, and the final Fannie Mae Form 1003/Freddie Mac Form 65, Uniform Residential Loan Application (URLA), if signed at closing.”
And when it comes to title insurance, Chapter Six is clear that FHA does not require title insurance, “for forward mortgages at loan closing. However, the lender is responsible for conveying good, marketable title to FHA when a claim is filed.”
There are many other issues that related to FHA loan closing which we will examine in a future blog post.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for review prior to being posted on the site.
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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