Keeping the Process on Track
The amount of time spent shopping for a home. Additional requests from the mortgage underwriter. Appraisal-related issues including required repairs. The amount of documents that are needed.
Once you have found a home you love (that passes the FHA inspection and appraisal) it will take about four to six weeks to close. Your mortgage application will move into the underwriting phase, in which all documentation is reviewed by an underwriter and they will inform you if there are any issues.
FHA loans are a bit of a hard sell in this market because they're not a clean and simple process. Many sellers (depending on the market) are looking for offers that are cash with no contingencies at all. So coming with FHA financing is considered a ``weak'' offer.
How long is an FHA appraisal good for? In general, FHA appraisals are good for up to 180 days.
The three-day period is measured by days, not hours. Thus, disclosures must be delivered three days before closing, and not 72 hours prior to closing. Note: If a federal holiday falls in the three-day period, add a day for disclosure delivery.
With FHA loans, you also have to pay an upfront mortgage insurance fee. This can be financed, but it will cause your mortgage insurance payments to be more expensive than with a conventional mortgage. Inspection standards: To qualify as an FHA-eligible property, a home must go through a property standards inspection.
Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems. Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
Unlike conventional purchase loans, there is no appraisal waiver option if you buy a home with an FHA loan.
Timing Requirements – The “3/7/3 Rule”
The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.
However, some mortgage lenders promise speedy closing timelines, as fast as seven to 10 days in some cases. The fastest closing timelines are typically when the buyer pays cash and can skip the appraisal process.
FHA loans: The ICE Mortgage Technology data shows that Federal Housing Administration loans take an average of 44 days to close. FHA loans operate on a timeline similar to conventional loans.
In 2022, 9.1% of applicants were denied a home-purchase loan, according to data collected under the Home Mortgage Disclosure Act. However, some loan programs have a higher denial rate than others. Here's how it breaks down. Federal Housing Administration loans: 14.4% denial rate.
Is it hard to get an FHA loan? Getting any type of home loan requires effort and resources, but generally, it's easier to qualify for an FHA loan than for a conventional mortgage. With the pandemic and recession, however, many lenders' FHA loan and refinance requirements have become more restrictive.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
The overall structure of the property must be in good enough condition to keep its occupants safe. This means severe structural damage, leakage, dampness, decay or termite damage can cause the property to fail inspection. In such a case, repairs must be made in order for the FHA loan to move forward.
Common reasons for FHA loan denial include low credit scores, high debt-to-income ratios, insufficient income, insufficient funds for a down payment, and properties not meeting FHA guidelines.
Some reasons a seller might refuse an FHA loan include misconceptions about longer closing times, stricter property requirements, or the belief that FHA borrowers are riskier.
FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or more. Borrowers with a credit score of 500 to 579 need to put 10 percent down. Conventional conforming mortgages only require 3 percent down, and VA and USDA loans require no down payment.
Since your home must meet FHA property minimums, the appraisal process may include more requirements than a conventional home loan. The appraisal is required to be performed by an FHA approved appraiser and may have additional inspections which could result in a higher appraisal cost.
1 week out: Gather and prepare all the documentation, paperwork, and funds you'll need for your loan closing. You'll need to bring the funds to cover your down payment, closing costs and escrow items, typically in the form of a certified/cashier's check or a wire transfer.
Clear-to-close buyers aren't usually denied after their loan is approved and they've signed the Closing Disclosure. But there are circumstances when a lender may decline an applicant at this stage. These rejections are usually caused by drastic changes to your financial situation.
Things like changes to the interest rate, changes to the loan amount, and APR changes over an eighth of a percent, can trigger another waiting period.