Have you decided that an FHA loan is the right choice for your home purchase? Maybe it’s because you only have 3.5% to put down on the home. Maybe you have less than perfect credit and heard that FHA loans are a good option for borrowers like you. No matter the reason, you should take care in finding the right FHA lender for pre-approval.
First, you should know that not all lenders offer FHA loans. HUD must approve lenders to represent the FHA. These lenders are licensed and approved to do the underwriting in FHA’s name. Just because a lender has FHA approval doesn’t mean they are the right lender for you, though.
Keep reading to learn what to look for in your FHA lender.
Ask About Experience
You are better off working with FHA lenders that have experience with FHA loans. If they recently became licensed, you may want to try another lender. There’s nothing wrong with asking a lender how many FHA loans they have underwritten thus far. This will give you an idea of how well they understand how the FHA works. While the FHA process isn’t that much different than other loans, it does have its nuances that a lender must understand.
Ask About Lender Overlays
Next, you’ll want to know what lender overlays a lender requires. Just because a lender offers FHA loans doesn’t mean the only requirements they have are the guidelines set by the FHA. These are the minimum guidelines they must require. Lenders have the opportunity to add their own requirements onto the loan, though.
For example, the FHA allows credit scores as low as 580. Technically, that’s a fair credit score, which means you do pose a risk of default. Some lenders may not be comfortable with that level of risk. They may want you to have a credit score around 620 or even higher. The same is true for debt ratio requirements, employment histories, or even cash reserves.
Asking a lender upfront what lender overlays they require will help you determine if a particular FHA lender is right for you.
Ask About Turnaround Time
The FHA doesn’t get involved in the underwriting process for FHA loans, so they don’t make the process longer. But, each lender has their own turnaround time. It depends on their workload along with their normal process. If you are on a strict timeline, you’ll want a lender that can meet those requirements beyond a reasonable doubt.
Ask as Many Questions as You Have
Aside from the above questions, you should ask FHA lenders any questions you have. Pay close attention to their response. Do they respond in a timely manner? Are you comfortable asking the questions that are on your mind? Do you trust what the loan officer is saying to you?
Sometimes your gut will give you the answer regarding whether an FHA lender is right for your pre-approval or not. Luckily, you won’t hurt your credit score if you secure a pre-approval from several FHA lenders at once. This gives you the opportunity to truly see how lenders work, helping you to decide which lender is perfect for you.