FHA Loan Approval Process On Purchase And Refinance


FHA Loan Approval Process On Purchase And Refinance

This BLOG On FHA Loan Approval Process On Purchase And Refinance Was UPDATED On December 7th, 2018

Whether a mortgage loan applicant needs a purchase or a refinance, the FHA Loan Approval Process is similar.

FHA Loans are the most popular loans in the U.S. Home buyers can qualify for FHA Loans with the following:

  • 580 credit scores
  • 3.5% down payment
  • DTI as high as 56.9% back end and front end DTI 46.9% front end with scores of 620 and higher
  • Do not have to pay off outstanding collections or charge offs to qualify for FHA Loans

Steps In The Mortgage Process

With purchase mortgage loans, home buyer would need a pre-approval to put in an offer.

  • On this blog, we will explain the step by step process from obtaining a pre-approval to closing a FHA mortgage loan

Pre-Approval Versus Pre-Qualification

A pre-qualification and a pre-approval are different.

  • If you want to know whether you are pre-qualified for a certain loan program, just click on the Fast Quotes icon on this website:
    • Fill out the basic general information requested
  • It will probably take less than two minutes 
  • The assigned loan officer will then contact borrower and discuss how much they could qualify for and an estimate of their monthly payment

Pre-Approval During FHA Loan Approval Process

A pre-approval has a lot of weight.

  • Home buyers who need a pre-approval letter, click on the APPLY NOW icon on the top right section of this website:
    • complete the 1003 mortgage application
  • It is a 4 page secured online mortgage application:
    • Every section that applies to borrowers needs to be completed
  • This online mortgage application will eventually be part of permanent official application borrowers and co-borrowers need to sign
  • It is extremely important in the FHA Loan Approval Process
  • This application will determine whether borrowers are qualified or not

Pre-Approval Occurs Before FHA Loan Approval Process

Pre-Approval occurs before the loan process actually begins.

  • The lender gathers information about income and debts, and makes a financial determination about how much house the borrower may be able to afford
  • Once mortgage loan applicants have submitted their online mortgage application, we will then submit the application to an automated underwriting system for an official approval from AUS

How Much Home Can I Afford?

It’s a good idea to know how much home the home buyer can afford before starting shopping for one!

  • Homeowners who are refinancing the loan on their existing home, then the pre-approval process should help decide whether refinancing is feaseable or not:
    • Also determine whether the refinance will save the homeowner money in the long run
  • A credit check is pulled on the pre-approval stage of the mortgage process


After a home buyer has decided on which home to purchase and have a signed real estate contract or once they have decided to go ahead and refinance their current home, we will start the FHA Loan Approval Process.

  • We will forward the online mortgage application that has been completed earlier for e-signature:
    • Also all other state and federal disclosures will be disclosed
  • Disclosures such as the Loan Estimate needs to be disclosed within three days 
    • Loan Estimate will itemize rates, terms, costs
    • It will disclose estimated costs that third party vendors will can charge will need to be disclosed

Signing Mortgage Application And Disclosures

Once mortgage applicants reviewed and studied the mortgage application and all of the disclosures, they need to return it to me as soon as possible.

  • The FHA Loan Process can proceed to the next step
  • We will be requesting needed financials that will be required to process
  • Paperwork such as 2 years tax returns, 2 years W2s, recent bank statements, and 30 days paycheck stubs needs to be provided

Processing  FHA Loan

  • Once we received signed mortgage application and disclosures, it gets assigned to a mortgage processor
  • The processing department will review the mortgage application and verify income, debt, liabilities, and assets with the documentation you have submitted to get it ready for underwriting
  • If there are bad credit items that need explanations such as late payments, judgments, collections, tax liens, previous foreclosure and bankruptcy, we will require explanations:
    • Need supporting documents
  • Borrowers will be communicating with a mortgage loan processor at this point

Role Of Mortgage Processor During FHA Loan Approval Process

The processor will also order an appraisal, title, survey, insurance, and other pertinent items needed to proceed with your mortgage application process to the next level, which is underwriting.

The processor’s main job and goal is to have a complete mortgage package so the underwriter will have no problem in issuing a clear to close and fund the mortgage loan.

Underwriting Stage Of FHA Loan Approval Process

The next step in the mortgage application process is underwriting.

  • Our underwriters are responsible will be reviewing the mortgage application package that was prepared by mortgage processors
  • It is the underwriters job to verify everything on the mortgage application with supporting documents borrowers have provided
  • Make sure that it meets the investor’s lending criteria
  • If the underwriter needs more information, the mortgage loan application will be place on suspense status until the underwriter receives the requested documents
  • Once the underwriter feels that all the documents he reviewed corresponds with mortgage application and all conditions are met, the underwriter will then issue a clear to close
  • A clear to close means the mortgage loan is ready to fund
  • The loan processor will then contact the borrower and check on when to schedule the real estate mortgage loan closing
  • The last and final process in the mortgage application process is the closing

Clear To Close And Closing

The closing is the final step in the mortgage application process.

  • The closing is scheduled after all conditions have been cleared
  • The mortgage investor certifies a full mortgage loan approval
  • The mortgage loan gets funded at closing via a cashier’s check or bank wire that is sent by the investor to a closing agent
  • The closing agent then disburses the funds in exchange for the transfer of the title to the property
  • This is the final step of the mortgage application process
  • On a purchase mortgage loan closing, the keys are exchanged and everything is disbursed on the closing date
  • On a refinance mortgage loan closing, the funds are not disbursed until three days after the closing due to the mandatory 3 day rescission waiting period

Home buyers  or homeowners with questions or needs to get pre-approved, please contact us at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

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