Is Your Lender FHA Approved?

Getting a timely approval for a loan requires the borrower to work with lending companies that have the requisite experience and expertise to handle their loan application effectively. If you are considering a FHA loan to finance your new home purchase or refinance an existing loan, then you need to find a good FHA approved lender that can close your loan without any hiccups.

FHA offers a number of loan programs for both purchase and refinance. In addition to 203(b), 203(k) programs, FHA also offers streamline refinance mortgages and HECM reverse mortgages.

A majority of the nation's banks and mortgage lenders are approved to originate FHA loans. Finding a local lender need not be difficult as the HUD website offers the complete list of FHA approved lenders on their website. Using the convenient search form, a borrower can filter through the thousands of lenders to find a reputable FHA lender locally.

FHA Lender Approval Process

The process of loan origination, underwriting and closing are entirely handled by the lender. FHA basically insures the loans funded by approved FHA lenders against losses that may arise in the event of borrower failing to make their repayments and ending up in foreclosure.

Depending on the lending history, size and qualifications, FHA issues a number of different lender approvals. In order to become an FHA approved lending institution, the company seeking approval must either be a registered limited liability company, corporation, partnership or a chartered institution. Individuals who operate a sole proprietorship are ineligible to qualify as a FHA lender. After gaining the appropriate FHA approval, a lender can originate loans that meet the guidelines and requirements of FHA loan programs.

Currently, lenders who wish to become FHA approved must submit their loan application packages only through the agency's online website. FHA no longer accepts paper applications for lender approvals, effective June 20, 2012.

The online application form allows the lenders to apply for both Title I and Title II approval on a single application. At this time, existing FHA lenders must still use the paper application if they wish to expand their approval beyond what they currently hold at the moment.

Types of FHA Lenders

FHA issues four different types of lender approvals depending on the tasks the licensee wish to undertake.

FHA Lending in 2012

According to recently released data regarding the FHA loans originated by HUD approved lenders for 2012, the total volume has decreased slightly from 2011, despite the robust recovery in housing market. The total number of FHA-insured loans came in at 1.24 million for a total loan amount of $213 billion. These numbers are about 2% lesser than the volume originated for the fiscal year 2011 by FHA approved lenders. For the fiscal year that ended in September 30, 2011, a total of 1.27 million loans were made to home owners for an aggregate amount of $218 billion.

FHA insures the loans made by its approved lenders based on its lending guidelines. The requirements for FHA mortgage are quite flexible and are easier to qualify. The down payment can be as low as 3.5% for residential purchase transactions. The qualifying criteria regarding income, credit and debt-ratios is also less stringent when compared to traditional home financing terms offered by conventional mortgage lenders.

Since its inception in 1934, Federal Housing Administration, a division under the Department of Housing and Urban development, has provided insurance guarantee to more than 34 million homeowners for a variety of residential financing needs. FHA does not directly originate, underwrite or fund the loans it insures. It basically sets loan program guidelines that the approved FHA lenders follow to gain mortgage insurance eligibility from FHA.

According to FHA lending guidelines, only single-family and multi-family residential properties are eligible for financing through a FHA approved lender. Only owner-occupants that plan on occupying their new purchase as their primary residence will be considered for home financing. Second home buyers and investors are ineligible for most FHA home loan programs. In the case of refinancing, the requirements regarding the owner-occupancy may be relaxed in reasonable situations.

Currently, the FHA interest rates are at a historically low level. The low interest rates combined with the agency's relaxed qualifying criteria has dramatically increased the number of home buyers and homeowners opting for FHA programs.

Top FHA Approved Lenders for 2012

The composition of the top FHA lender list throws up some interesting facts. Among the top 10, national banks occupy most of the top positions. Many mortgage branch networks also managed to grab several spots among the top FHA originator list.