If you’re looking to buy a house with an FHA mortgage loan, you’ll have to work with an FHA lender. They are only called FHA loans because they are insured by the Federal Housing Administration. It’s still private mortgage companies that originate them.
Many home buyers are drawn to the less stringent application and approval process of FHA mortgages, but FHA-insured loans are NOT created equal. While the FHA has some qualification standards in place, lenders can modify these rules as they see fit. That said, the FHA lender you choose will ultimately determine whether you got a good deal or not.
With so many lenders offering FHA loans, things can get quite confusing for first-timers. If you’re new to FHA loans, this article might help lead you to the right one.
What is an FHA lender?
Any institution authorized by The Department of Housing and Urban Development (HUD) to originate, underwrite, close, buy, and sell FHA-insured mortgages are considered FHA lenders.
“FHA-approved” means a firm or company has submitted the required documents, complied with the guidelines, obtained the approval of HUD / FHA. To continue originating and servicing FHA loans, these lenders have to follow specific guidelines set forth by the Housing and Urban Development and FHA, maintain an excellent neighborhood watch numbers, pass the annal loan audits, and submit their financial data to the agency annually.
In recent years, the HUD has made it easier for lenders to get approval. Thus, the list of FHA-approved lenders rises every year. But while the growing number of FHA lenders makes the program more accessible to the public, it also increases the possibility of working with less competent applicants.
Finding an FHA lender
If your friends or relatives have availed of a mortgage loan product before, they may recommend their lender to you. While there’s nothing wrong with considering their referrals, do your own research. Just because it worked well for them, does not mean it’s going to be the same for you. Worse, their lender may not specialize in FHA loans.
To find an FHA lender near you, utilize HUD’s online lender search tool. But should you need an opinion on the matter, ask your real estate professional. Someone who has worked with multiple lenders can offer a valuable insight that’s more in line with your situation. Don’t forget to ask your agent some important details about his or her recommendations.
Choosing the Right FHA Lender
One of the first questions to ask a potential lender is, “How long have you been originating FHA mortgages?” Also, inquire about their mortgage rates and other fees involved. While you’re at it, you might as well ask for an estimate too.
As much as possible, choose a local FHA lender that you can visit and speak with when necessary. You’ll want to work with someone who has been handling FHA loans for years; who knows the ins and outs of the process and can make the whole thing a pleasant experience.
Buying your first home is a great milestone; don’t let anything or anyone ruin it for you.