FHA Loans And Choosing The Right FHA Mortgage Lender

Choosing The Right FHA Mortgage Lender

Gustan Cho Associates

Choosing the right FHA Mortgage Lender is extremely important for FHA mortgage loan borrowers who need to qualify for FHA Loan with no mortgage lender overlays .FHA, the Federal Housing Administration, is part of the United States Department of Housing and Urban Development, HUD, and is a governmental agency.  FHA is not a mortgage lender.  The role of FHA is to insure home loans that are FHA approved.  A FHA Mortgage Lender is a private mortgage company such as a bank or mortgage company that has been approved by the Federal Housing Administration and given their blessings to originate, process, underwrite, and fund FHA Loans.  For a mortgage borrower to get a FHA Loan, they need to go to an FHA Approved Mortgage Lender.

Importance Of Choosing The Right FHA Mortgage Lender

A FHA approved FHA Mortgage Lender either uses their own funds through a warehouse line of credit or can broker a FHA home loan.  FHA has nothing to do with the funding of the FHA Loan.  FHA will insure the FHA Loan originated and funded by a FHA Mortgage Lender in the event if the FHA Loan defaults.  In order for FHA to insure the FHA Loan that defaults, FHA Approved Mortgage Lenders need to follow the FHA mortgage lending guidelines.  FHA has strict mortgage lending guidelines with regards to credit, prior bankruptcies and foreclosures, and debt to income ratios.  As long as the mortgage lender follows the FHA mortgage lending guidelines, FHA will insure the home loan in the event if the FHA Loan defaults and goes into foreclosure.  If the FHA Mortgage Lender misses part of the FHA guidelines when processing and underwriting the FHA Loan, the Federal Housing Administration will not insure the FHA Loan.  This is the reason why FHA Mortgage Lenders may require many conditions on a conditional loan approval.  A lot of conditions requested may sound petty but the mortgage company cannot take a chance of the FHA Loan not being insureable by the Federal Housing Administration. Choosing the right FHA mortgage lender is crucial for mortgage loan borrowers with less than perfect credit or those with higher debt to income ratios.

Are All FHA Mortgage Lenders The Same?

All FHA Mortgage Lenders may have different mortgage loan eligibility requirements.  Just because they are a FHA Mortgage Lender does not mean they all go by minimum FHA Lending Guidelines.  All FHA Approved mortgage lenders needs to meet the minimum lending guidelines set by FHA.  As long as the FHA Mortgage Lender follows the FHA lending guidelines, the FHA Loan is insureable.  However, many mortgage lenders have something call mortgage lender overlays which are additional lending guidelines on top of the minimum federal lending guidelines set by FHA.  Choosing the right FHA mortgage lender is important for borrowers who need a FHA Loan with no investor overlays. For example, FHA minimum credit scores to qualify for a 3.5% down payment home loan is 580 FICO.  However, many FHA Mortgage Lenders may have mortgage lender overlays on credit scores where they will not accept many mortgage loan borrower’s with credit scores of under 640 FICO.  Most banks have a lot of mortgage lender guidelines and most banks will not accept any mortgage loan borrower with credit scores of under 640 FICO.

Examples Of Mortgage Lender Overlays

Most mortgage lenders will have mortgage lender overlays. Besides mortgage lender overlays on credit scores, there are mortgage lender overlays on debt to income ratios.  For example, FHA allows a maximum back end debt to income ratio up to 56.9% for FHA mortgage loan borrowers with credit scores of higher than 620 FICO.  Many FHA Mortgage Lenders may have debt to income ratio overlays where they will cap the back end debt to income ratios to 45% instead of the 56.9% allowed under FHA mortgage lending guidelines.  Other FHA Mortgage Lenders may set a mortgage lender overlay on debt to income ratios where they will extend the debt to income ratios to 55% if the borrower has credit scores of 680 FICO or higher where FHA minimum debt to income ratio guidelines are capped at 56.9% only with a 620 FICO credit score.  Other examples of mortgage lender overlays are FHA 203k Loans.  Most FHA Mortgage Lenders have overlays on FHA 203k Loans where the minimum credit score required is 640 FICO.  I have just closed on a FHA 203k Loan last week where the borrower had a 582 FICO credit score.  FHA only requires a 580 FICO credit score on all FHA Loans which includes FHA 203k Loans.

Contact Us If You Are Looking For A FHA Lender With No Overlays

If you are looking for a FHA Mortgage Lender with no overlays, look no further.  Gustan Cho and his associates are specialists in FHA Loans and have no mortgage lender overlays  As long a you get an automated approval per Automated Underwriting System and can provide the conditions on the AUS, we will close your FHA home loan and close it on time.  Please contact us at 262-716-8151 or email us at gcho@gustancho.com.  You can also register for our free daily mortgage and real estate newsletter at www.gustancho.com.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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