Written by Karina C. Hernandez; Reviewed by Jann Seal, Licensed Real Estate Sales Associate. Former California Real Estate Sales Associate.; Updated November 10, 2018
Apartments for sale in La Defense. Located in the heart of the largest (and highest) business district in Paris, also known as the 21st.
- 1 When Does a Mortgage Approval Expire?
- 2 How Long to Process an FHA Mortgage?
- 3 What Does It Mean When You Don't Need an Appraisal of Your House?
- 4 What Does Pending Bank Approval Mean?
The Federal Housing Administration's mortgage programs offer a variety of benefits to low- and moderate-income borrowers. The phrase FHA-approved means you have met a certain set of guidelines laid out by the agency. The process for becoming an FHA-approved borrower involves a thorough credit and income review. The FHA also requires certain property types, such as condominiums, to undergo a separate approval process. Having an FHA approval in-hand when shopping for a home can help you get an edge on the competition.
Before shopping for a home, get a mortgage pre-approval from a lender familiar with FHA terms and requirements.
Making FHA Approval Easier for Borrowers
An FHA-approved lender runs basic credit and financial information to determine borrower eligibility for FHA mortgage insurance. FHA insurance protects lenders in case of borrower default, paying back a portion of a lender's losses in the event of foreclosure, for example. Borrowers seeking to purchase or refinance a home with an FHA mortgage have more leeway when it comes to credit scores and debt-to-income ratios. Most FHA loans also require only a 3.5 percent down payment.
Navigating FHA Approval Types
FHA approval comes in two forms: automated and manual. Using the FHA's proprietary Technology Open To Approved Lenders, or TOTAL, mortgage scoring system, lenders can generate an automated FHA approval for borrowers within minutes. An approval through this system is as valid as a loan manually reviewed by an FHA underwriter, but carries fewer conditions and vetting. The lender begins the FHA application process by running borrower credit, asset, debt and employment details through an automated underwriting system to generate a certificate. Should a borrower's information meet all preliminary requirements for FHA mortgage insurance, they will receive an approval response; however, should it fall short of meeting the guidelines, the system may generate a 'Refer' response. The latter response means that the loan must go to an FHA underwriter for a more focused, manually underwritten process.
FHA Approved Condominiums
Certain property types pose more risk to the FHA, such as condominiums and manufactured homes. The FHA only approves condominium units located within FHA-approved condo complexes. This helps to ensure that the condominium association is financially viable and can weather potential financial storms, such as an increased rate of default on condominium dues, unforeseen or costly maintenance and lawsuits. Condominium associations with insufficient reserves or lower than 50 percent owner occupancy, for example, are not eligible for FHA approval. FHA borrowers seeking to purchase a condominium may have fewer options due to the FHA's stringent condominium approval guidelines. You can find approved complexes in your area by visiting the Department of Housing and Urban Development's FHA condominium lookup webpage.
FHA Approval Benefits Buyers
Real estate professionals recommend beginning the home-search process with loan pre-approval. Pre-approval, as opposed to full loan approval, means that the borrower's necessary income, credit, asset and employment information has satisfied a lender's preliminary requirements for granting loan approval. All that is generally left to comply with are property appraisal, title requirements and verifying certain financial facts through documentation. FHA borrowers who shop for a home with an FHA pre-approval from their lender increase their chances of successfully negotiating offers with sellers, as they are viewed as being further along in the loan process than non-preapproved borrowers.
About the Author
Karina C. Hernandez is a real estate agent in San Diego since 2004. She has also worked as a mortgage originator and real estate transaction coordinator. She has a B.A. in English from UCLA. Karina has written thousands of articles over the past 10 years for a variety of online channels, including eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.
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C., Karina. 'What Does FHA Approved Mean?' Home Guides | SF Gate, http://homeguides.sfgate.com/fha-approved-mean-41669.html. 10 November 2018.
C., Karina. (2018, November 10). What Does FHA Approved Mean? Home Guides | SF Gate. Retrieved from http://homeguides.sfgate.com/fha-approved-mean-41669.html
C., Karina. 'What Does FHA Approved Mean?' last modified November 10, 2018. http://homeguides.sfgate.com/fha-approved-mean-41669.html
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