FHA Underwriter

An FHA underwriter reviews your mortgage application against specific FHA guidelines. Their job is to make sure that the approved loan will qualify as an FHA-insured loan.

The Federal Housing Administration (FHA) does not lend money for home purchase or construction. Instead, the FHA provides insurance to lenders to protect the lender if the homeowner defaults on the mortgage loan. This loan guarantee program makes lenders more comfortable funding home mortgages, particularly the mortgages that might not qualify for a conventional financing from the lender. For example, an FHA-insured mortgage loan might be a good alternative for a borrower who:

• May not have an excellent credit score
• May have a high balance on their credit cards or other debts
• Needs money from family or friends to make the down payment
• Has gone through bankruptcy

The FHA sets the guidelines for the mortgages that they would be willing to insure. Although many of the guidelines are the same throughout the United States, some aspects of the guidelines are specific to the geographic area in which the home is located.

You can apply for a FHA-insured mortgage through a financial institution or a mortgage lender. FHA-insured loans can be made for:

• First-time homebuyers
• Homebuyers who might not meet conventional lending guidelines
• Homeowners who want to refinance their mortgage, even if it is not an FHA-insured loan

The first step in the review of a mortgage application is review and validation by a loan processor. The loan processor may request additional information from the applicant such as proof of income or copies of tax returns to verify that the information on the loan application is complete and truthful. The processor also arranges for verification of the applicant's credit history and income.

Once the loan processor has verified all of the information, a package of all materials associated with the loan is forwarded on to the underwriter. It is the underwriter's responsibility to compare the lender's loan guidelines against the information in the loan package including:

• Applicant's credit and income information
• Property appraisal
• Title report
• Down payment sources
• Fees and commissions sources

The underwriter makes the decision about whether the lender should extend the mortgage loan to the applicant.

An FHA underwriter does not work for the FHA. They are employed or contracted by a financial institution or mortgage lender to review a mortgage application as part of the mortgage application process. The review of the loan package is the same process as for a non FHA loan. The difference is that the FHA underwriter works against a special set of FHA guidelines in areas such as:

• The debt to income ratio of the applicant
• The source of the down payment
• The amount of closing costs and fees
• The source of financing for the closing costs

If the loan meets the requirements of the FHA mortgage insurance program, the FHA underwriter can approve the loan for the lender and certify the loan as qualified for FHA insurance.

It is the FHA underwriter's responsibility to be an expert on the current FHA underwriting guidelines, procedures and policies. They are trained mortgage underwriters who have received special training in FHA guidelines. Once they have experience with FHA loans, they can attend advanced training as a Direct Endorsement (DE) Underwriter.

Once a DE underwriter is employed, it is the employer's responsibility to register the DE underwriter in the FHA Underwriter Registry. This registry lists information on each DE underwriter including:

• Status of their FHA license
• FHA underwriter identification number
• Underwriter's name
• Employer name
• Geographic location
• Contact information for the lender
• Contact information for the underwriter

The FHA underwriter is knowledgeable in using the information provided about the applicant and the property to determine if the loan falls within the underwriting guidelines and can be approved. If you loan is declined you will be told the reason for the decline. If you feel that the underwriter may not have had complete and accurate information, you can request a second review.

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