It really is not that difficult to close an FHA loanas quickly as any other type of loan. But here are the steps that need to be followed in order to meet the time lines required on a purchase transaction.
Day 1- Take the loan application, run credit, get the Automated Credit Approval, request pay stubs, W2's, bank statements, drivers license and social security card copies. Actually, this entire step is normally already taken care of if the borrower has been properly PreApproved for an FHA Loan. On Day 1, the appraisal is ordered, and the escrow company is contacted to request escrow instructions and title.
The goal is to have a complete loan package ready for final underwritten approval within 7 days. The lender needs to be proactive in notifying all parties involved in the transaction of anything that is hold up the deal.
Day 7 - By now the FHA Loan package should be complete. The file is submitted to underwriting for full underwritten approval. Depending on the lender, this step can take anywhere from 1 day to many more days. Since this post is about how to close in 3 weeks or less, we'll stick with the 1 day underwritten approval. This is also where being a Direct Endorsed FHA Lender is important.
Day 8- Underwritten approval is received. There will typically be a few Prior to Loan Document conditions that are required before moving to the next step. We'll assume it takes 3 days to solve these "PTD" conditions.
Day 11 - All Prior to Loan Document conditions are submitted to underwriting.
Day 12- PTD's are signed off and Loan Doc's are prepared. Most of the time, the loan doc's are actually emailed to the escrow company where they are printed out are prepared for notarization.
Day 13 - Loan docs are signed. Depending on the time of day the loan doc's are signed, the loan docs are returned to the lender.
Day 14 - Signed docs are received by the lender. Over the next few days any Prior to Funding conditions are resolved and funding is prepared.
Day 16 - By now the FHA loan should be funded.
There are of course things that can cause complications in any deal, but if the lendersticks to a strict time line, then there will be plenty of time resolve most issues that arise. If the borrower has been properly PreApproved before making an offer, then most borrower issues should have already been resolved.
The goal is to make the purchase transaction is smooth and easy as possible.
Authored by Tim Storm, CMPS, Sr. Loan Officer with Home Point Financial, a Direct Endorsed FHA Lender located in Newport Beach, CA. For information on FHA, or to be prequalified please call 949-829-1846.