What Happens After Your FHA Loan Approval?
It’s been a busy, long several months of touring homes and meeting with your realtor and mortgage broker. Finally, you have been given the green light on your FHA loan approval! So what happens after that? As a buyer you should know that among the requirements that are imposed on buyers seeking FHA mortgages, HUD 41551.1 establishes rules and regulations that dictate what happens when a FHA loan is approved or denied.
So What Happens After My Loan Application is Approved?
Like many things in life, the government is not perfect but it has worked hard to ensure that the process for home purchasing is as clear and simple as possible. In HUD’s 41551.1 publication, the very first section of the first chapter maps out exactly what a lender must do:
According to HUD, once your FHA approved lender approves your application, the Direct Endorsement (DE) underwriter begins by doing three things:
- Document applicant’s credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary
- Record any approval conditions and/or mortgage amount modifications in the “Underwriter Comments” section of the form
- Formalize and Authorize the borrower to begin closing process
So that’s what the mortgage underwriter has to do, the lender also has an obligation. Once an approval decision is made, the lender is responsible for adequately notifying the borrower (in writing or verbally) right after receiving news from the underwriter.
How Long Does My FHA Loan Approval Last?
It should be noted that timing is an important consideration when jumping through the hoops towards your new home. Once your loan application is approved, as the borrower (home buyer), you can expect that to remain valid for 90 days. If for whatever reason that 90 day period expires, there may be a case where the lender requests that your home appraiser re-certify the original FHA appraisal report. Certain conditions that may alter this 90 day period, which is defined on the form titled “HUD/VA Addendum to Uniform Residential Loan Application” (page 3 of HUD-92900A), may include any terms including:
- Conditional Commitment
- Certificate of Reasonable Value (CRV) issued by the VA
- Property appraisal and the underwriter’s approval
What Documents Help Finalize The Home Loan Approval?
Following approval and assuming that any and all conditions have been met, the borrower will now be well into the loan document preparation and review phase. In this stage of the process, a collection of legally binding, official loan documents come together to make your home loan and real estate transaction process final. To that, there are three documents in particular that you should be aware of. These include a promissory note, the deed, and a HUD 1 document.
A promissory note is a common financial instrument and legally binding form of private currency. In real estate, a promissory note will include terms of the loan including the principal amount being borrowed and interest that is to be incurred, terms of the repayment, and it will specify a monthly repayment amount. A promissory not will name the parties that are in the transaction and also reflect a maturity date. In the United States, it is not uncommon for real estate transactions to take place with what is called a negotiable promissory note, also referred to as “mortgage notes.”
As things pertain to real estate, a deed of trust is a deed that helps define ownership of the property. Noting that a loan indicates that you don’t actually own the property until you have paid your mortgage in full, an equitable title stating ownership of the real property (the land and its structures) is effectively transferred to a trustee. The trustee will act as a third party that holds the deed as a security for the debt and equity that is hold by a borrower and the lender. The terms of the deed are recorded with the county recorders office at closing.
HUD 1 Document
This HUD 1 Settlement Statement is a basic form that itemizes the various fees and charges that are present in a real estate transaction. This typically is sent out about one week after closing. The HUD 1 document was originally created by the US Department of Housing and Urban Development to let a borrower and lender see an itemized list of incoming and outgoing funds. This list would often include any “POC” (Paid Outside of Closing) fees that may have been paid before closing. This document is still used today for any government insured home loans however in 2015 things changed a bit. Since then, it may be more common to receive a Closing Disclosure form for other types of mortgages.
Position Yourself for a “Yes!”
Whether you are deep into the home loan application process or you are just trying to learn about the process, the team at FHA Loan Search is here to help. Learn more about home loans and what comes after that first “approval.” Learn about what the escrow company does to verify that the loan underwriting process is complete. Also, loan recording doesn’t refer to a sound studio. Learn about what you and the escrow agent must do to get your transaction finalized on “on record” through the loan recording process.