An FHA underwriter assesses whether to provide an applicant with a mortgage using HUD guidelines. The underwriter can approve or deny the file, or approve it with contingencies. The loan officer collects information for the file, which includes mortgage application, bank statements, payroll, title work, and property valuation.
An underwriter is an employee of a mortgage company who decides whether to approve or deny the mortgage loan the applicant is seeking. FHA stands for Federal Housing Authority, which is a government agency that falls under the US Department of Housing and Urban Development (HUD). An FHA underwriter uses the HUD-determined underwriting guidelines for FHA insured loans to assess whether or not to provide the applicant with the mortgage.
When an applicant applies for an FHA loan, it is through a traditional mortgage lender, such as a bank, that offers FHA mortgage programs. FHA mortgages are government funded or insured, which means that if the borrower defaults on the mortgage, the FHA still pays the lender a percentage of the mortgage balance.
The FHA’s goal is to encourage home ownership, but it still has its own set of criteria and guidelines that applicants must meet to obtain an FHA mortgage. A loan officer works with the applicant to collect all of the information that must be entered into the mortgage file before it is forwarded to the FHA underwriter for a decision.
File assembly includes mortgage application collection and verification. The loan officer will also collect the applicant’s bank statements, payroll, order title work on the property, and property valuation as well. When all these forms come in, the loan officer reviews them for accuracy in preparation for sending the file to the FHA underwriter.
Once the file is completed, the FHA underwriter reviews each piece of information in the file. The underwriter is verifying that the applicant’s information meets the guidelines set by the FHA and HUD for the applicant to obtain the loan. The FHA underwriter can deny or approve the file based on the information in the file.
The FHA underwriter also has the option of approving the file, but with contingencies. For example, sometimes the mortgage file goes to the underwriter to approve the applicant before a property is chosen. The FHA underwriter can choose to approve the file depending on whether the appraisal and title work returns with the correct amount and is clear. This means that when the title work and appraisal is complete, the file will be returned to the FHA underwriter for them to clear these contingencies so the file can be closed.
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