Are all FHA Lenders the Same?
FHA loans are the mortgage of choice for many first-time home buyers because their guidelines are more flexible than Fannie Mae and Freddie Mac approved loans. FHA guidelines will allow for lower credit scores and low 3.5% down payment.
Most lenders in the United States with a few exceptions offer FHA loans as part of their mortgage portfolio. This leaves consumers with so many choices and it may seem that no matter which lender you speak with, the product offering and rates will be the same.
Are all FHA Lenders the Same?
All FHA lenders are not the same because every lender may not offer all of the FHA programs and they are able to impose their own restrictive requirements which may exclude some borrowers from applying.
Why all FHA Lenders are Not the Same
We just said that all FHA lenders are not the same because of differences in product offerings and because some may have different requirements. Below, we will outline how and why FHA lenders are not the same.
Products – The FHA offers different types of home loans to help home buyers and those interested in refinancing many options to accommodate their needs. However, lenders decide which FHA loan programs they prefer to offer. Here is a list of the typical programs that should be available to all consumers but may not be offered by the lender you are speaking with today.
Credit Score Requirements – If you read our article on FHA credit score requirements, you will see that FHA guidelines will insure loans for borrowers who have a credit score as low as 500. However, most FHA lenders do not allow for credit scores that low. Some have minimums set at 620 or higher. If the lender you are speaking with says your credit score is not high enough, then find another lender.
Rates – The Federal Housing Administration does not set the interest rates. Lenders have the flexibility to be very competitive, or put a premium on the rates they offer. This is done based upon their desire to win your business. They also may put more of a premium on the rehab and construction loans which take more work on their part.
Underwriting – When you apply for a mortgage, the lender is the one who will process and underwrite your loan. Most borrowers gauge their experience with a lender based upon the loan officer they interact with. That makes sense because to the consumer, the loan officer is their direct representative. However, the backbone of any lending organization will be the processors and underwriters. In most instances, the strength and competency of those individuals will play a major role in whether you will be satisfied with your FHA mortgage process with the lender. Not all processors and underwriters at every lender will be the same.
Finding the Right FHA Lender
If you are shopping for a mortgage and you believe an FHA loan is right for you, then you will first need to do a personal assessment of your credit situation and also determine which type of FHA loan you need. We can provide you with all of the research tools needed right here to help with your decision. Then, once you understand what your credit scores are and the type of FHA loan you need, then target the lenders who can help in those areas.
For example, if your credit scores are in the mid 500’s and you know that you need a 203k rehab loan, then you should look only for lenders who can help with both. We can help you to find the right lender simply by completing the short loan scenario form.
To recap, all FHA lenders are not the same because many do not offer the same programs, will have different credit score requirements, and rates will be different. Although you may have a mortgage lender you used in the past, or you may have a lender that your realtor is recommending, you should absolutely interview others and get additional rate quotes.
We can help to match you with a lender who offers the FHA program you need and with a competitive rate. Just complete this FHA loan scenario form and we will get back to you immediately.
Best FHA Lenders – If you ever wondered who the best FHA lenders are, we wrote an article outlining how to shop for one and who some of the popular FHA lenders are in the industry.
FHA Pre-Approvals – This outlines the process and importance of getting pre-approved for an FHA loan before shopping for a home.
FHA Loan Requirements – This is a full explanation of exactly what is needed to qualify for an FHA loan.
How to get the lowest FHA interest rates – Learn how to shop for an FHA loan to make sure you are getting the lowest rate possible.