The right FHA mortgage lender can make your FHA loan process a breeze. The wrong lender can make it a nightmare. Sounds like a scary process, right? Luckily, it’s not that hard to find the right lender. You just have to know what to look for in a lender.
Find an Approved FHA Mortgage Lender
Before you can move forward with any lender on an FHA loan, you need an approved FHA mortgage lender. You can use HUD’s lender finder to see which lenders have this approval in your area. You can make your search as narrow or broad as you like.
You can use this list as your starting point to find the right lender. But if you already have lenders in mind and want to know if they are approved, you can enter their name in the finder. If the program comes back without any results, the lender isn’t FHA approved.
This is a very important step. The FHA will not insure any loan funded in their name if the lender doesn’t have FHA approval. This is because the FHA doesn’t fund the loans. They don’t even require lenders to send the loan package to them for approval. They approve specific lenders that understand the FHA requirements to fund FHA loans.
Find Out the Lender’s Experience
Because FHA loans are unique and lenders have to follow the FHA guidelines to the letter, you want an experienced lender. It’s not a bad idea to interview potential lenders, asking them how many FHA loans they have done.
You can ask specific questions too. For example:
- If you are buying a condo or townhome, ask the lender specifically how many condos or townhomes they have helped buyers purchase with FHA financing. The FHA guidelines for condos and townhomes are much different than single-family home requirements.
- Ask how long the FHA loan process takes. In general, it shouldn’t take any longer than any other loan, but some lenders add more time for government-backed loans. If you are buying a home, that extra time could be crucial to your contract deadline.
- Ask if they have any additional overlays. The FHA requires lenders to follow their rules to the letter, but they also allow them to add their own requirements. This could mean things like a higher credit score or lower debt ratio requirement. These are things you’ll want to know up front.
Once you know the lender’s experience or lack thereof, you can use that to help you decide if the FHA mortgage lender is right for your situation.
Obtain Mortgage Quotes
Now comes the fun part – getting the quotes. You should probably narrow your FHA mortgage lender search down to approximately 3 lenders. This should give you a good idea of the average interest rate and closing costs you deserve.
Apply for the loan with each lender and wait for the Loan Estimate to arrive. By law, you must receive it within 3 business days of applying for the loan. You can then compare the Loan Estimates side-by-side to see which lender will provide you with the best loan.
Don’t focus strictly on the interest rate, though. You should look at the big picture. How much will each lender charge in closing costs? Is there an origination fee? Is there a discount fee? What is the loan’s APR? This will give you an idea of how much the loan will cost you over its entirety. Then you can make an informed decision.
Once you have all of these factors, you can weigh the pros and cons of each lender. If you have a short deadline to get the loan closed, you may have to opt for the FHA mortgage lender with the quickest turnaround time. This may mean taking a slightly higher interest rate or paying a little more in closing costs, though. You’ll have to wade through the factors and decide which one will suit your needs the best and then move forward with that lender.
Taking your time finding the right FHA mortgage lender is crucial. This is likely one of the largest investments you’ll make in your lifetime. You want to make sure it’s a wise choice so that you can keep this loan for many years without issue.