Close your FHA mortgage faster

by Gina Pogol
January 24th, 2011

A borrower wrote to me about closing a mortgage fast because he found a very good deal on a condo but there was a backup offer and it was a cash deal. He had some credit boogers in the past and didn’t think he’d be able to get conventional mortgage insurance, but did not know if an FHA lender would be able to close the deal fast enough.

Condo approval can be iffy

If you need to close an FHA mortgage on a condo purchase, there can be issues. Condo projects need to be FHA-approved or you can’t finance your unit — if there are too many units owing HOA arrearages, too many FHA-financed condos in the development, or too many foreclosures, you won’t be able to get FHA financing. But even if the project would pass muster, the process takes time.

There are two ways condo projects may be approved; one is the HUD Review and Approval Process or HRAP, and that can take a while because the application has to go through a HUD Home Ownership Center (yes, a government agency).

The other route is the Direct Endorsement Lender Review and Approval Process (DELRAP), available to lenders with unconditional Direct Endorsement authority and qualified staff for reviewing and approving condominium projects. If you are going to try for FHA condo approval and need it fast,  apply with an FHA Direct Lender.

Direct Endorsement lenders get loans approved faster

When you’re in a big hurry, working with a Direct Endorsement (DE) lender is essential. DE lenders have to meet fairly strict criteria set forth by HUD. Applicable guidelines include HUD’s review of the company’s experience, its adherence to lending practices, its financial strength, and overall business ethics.  DE lenders get to approve and close FHA mortgages.

Other lenders / brokers can originate FHA loans. These Sponsored Third Party lenders submit files to DE lenders, which then underwrite, approve and fund the mortgages. The Direct Endorsement lenders are responsible for the accuracy of the submissions of their Sponsored Third Party Lenders for quality control, auditing, etc. DE lenders are on the hook for any mistakes or misrepresentations of mortgage brokers / lenders they choose to do business with. This additional layer of administration means that loans submitted by Sponsored lenders generally take longer to close. When timeliness matter, use a DE lender.

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