An underwriter is an employee of a mortgage company who decides whether to approve or deny the mortgage loan the applicant is seeking.
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, a government agency under the United States Department of Housing and Urban Development (HUD). An FHA insurer uses underwriting guidelines determined by HUD for FHA-insured loans to assess whether or not to mortgage the applicant.
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 insured or guaranteed mortgages, which means that if the borrower defaults on the mortgage, the FHA will continue to pay the lender a percentage of the mortgage balance.
The purpose of the FHA is to encourage home ownership, but it still has its own set of criteria and guidelines that applicants must meet in order to obtain an FHA mortgage. A loan officer works with the applicant to gather all the information that needs to be included in the mortgage file before going to the FHA underwriter to make a decision.
Attaching the file includes the collection and verification of the mortgage application. The loan officer will also collect the applicant’s bank statements, payment receipts, order the titling work of the property and also the appraisal of the property. As all of these forms arrive, the loan officer reviews them for accuracy and prepares to send the file to the FHA underwriter.
Once the file is complete, the FHA underwriter reviews each piece of information in the file. The insurer is verifying that the applicant’s information meets the guidelines established by the FHA and HUD for the applicant to obtain the loan. The FHA underwriter may reject or approve the file based on the information in the file.
The FHA underwriter also has the option to approve the file, but with contingencies. For example, sometimes the mortgage file goes to the insurer to approve the applicant before choosing a property. The FHA underwriter may choose to approve the file, depending on the fact that the appraisal and title work are returned with the correct value and are clear. This means that when the title work and review is done, the file goes back to the FHA underwriter to clear up these contingencies so the file can be closed.