Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

Get an FHA Refinance Loan
Get an FHA Purchase Loan
FHALoan.com
Get an FHA Refinance Loan
Get an FHA Purchase Loan
Click to Start Your Refinance or Purchase Loan

Why Some FHA Loans Are Denied


Why Some FHA Loans Are Denied
The Federal Housing Administration provides mortgage insurance on loans made by FHA-approved lenders, making homeownership more attainable for those who might not qualify for conventional loans.

While financial factors like credit score and debt-to-income ratio are key to loan approval, other non-financial aspects can also cause a denial.

Property Condition and Appraisal Concerns

The FHA has minimum property standards for homes being financed. Lenders must confirm the property meets these standards before approving the loan.

An FHA-approved appraiser will assess the property's condition, including its structure, foundation, electrical systems, plumbing, and overall safety. If the appraisal reveals issues, such as a damaged roof, faulty wiring, or a cracked foundation, the FHA may require repairs before approving the loan.

Appraisal Value Versus Sale Price

The appraisal also determines the property's fair market value. If the appraisal value is lower than the sale price, it can create an obstacle.

The FHA will only insure a loan for the appraised value, not the agreed-upon sale price. This protects both the borrower and the FHA from overpaying for a property.

In such cases, the buyer may need to renegotiate the price with the seller, make a larger down payment, or even walk away from the deal.

Is The Title Clear?

A clear title is essential for all real estate loans, and FHA loans are no exception. The title search examines the property's ownership history to ensure no liens, judgments, or other issues could affect the buyer's ownership rights.

Issues like unresolved boundary disputes, unknown easements, or outstanding taxes can complicate the title and lead to loan denial.

Property Types

While the FHA insures many property types, certain types are ineligible for FHA financing. These may include properties in certain coastal barrier areas, those deemed uninhabitable, or those located in areas with environmental hazards.

Additionally, homes not intended for year-round owner occupancy (such as vacation homes or investment properties) may not qualify for FHA loans.

Documentation Matters

Providing complete and accurate documentation is vital for loan approval. The lender will require various documents, including income verification, tax returns, bank statements, and employment history.

Incomplete or inconsistent documentation can raise red flags and lead to delays or denials. Borrowers must be prepared to provide all necessary paperwork and ensure accuracy promptly.

FHA Housing Counseling Options

Are you worried about your ability to qualify for an FHA mortgage? The FHA recognizes that navigating the home-buying process can be complex. The FHA offers housing counseling services to assist borrowers through a network of HUD-approved counseling agencies. These agencies can help inform you about various aspects of homeownership, including:

Pre-purchase Counseling: This counseling helps potential homebuyers understand homeownership's responsibilities and financial implications. It covers budgeting, credit, shopping for a home, and choosing the right mortgage.

Foreclosure Prevention Counseling: If a homeowner is facing financial difficulties and struggling to make mortgage payments, foreclosure prevention counseling can help. Counselors can assist with developing a budget, negotiating with lenders, and exploring options to avoid foreclosure.

These FHA housing counseling services are typically free or low-cost and can be useful resources for borrowers at any stage of the home-buying process.
See Your Credit Scores From All 3 Bureaus
See Your Credit Scores From All 3 Bureaus

FHA Loan Articles

Down Payments for FHA Loans

One of the major hurdles that keeps families from purchasing a home is the need for a down payment.  The FHA’s goal is to offer more homebuying opportunities to low- and moderate-income Americans and set more easily achievable down payment requirements for borrowers. 

When Should I Get Approved for a Home Loan?

One of the first steps to take when you decide to buy a home is getting pre-approved for a mortgage. It is important to know what it means to get pre-approved for a home loan, and what the pre-approval letter does and doesn’t do for your home buying chances.

What Affects a Home Loan Applicant's Credit the Most?

A home loan is one of the most important investments you can make. Buying a home means owning property, and being a homeowner means there's potential to watch your investment grow in value over time.  But first, the lender has to make sure the borrower is a good credit risk.

When Buying with an FHA Loan, Don't Skip the Home Inspection

This wait isn’t easy when you've been shopping for a new home. But getting a home inspection is a crucial step, and not one you should consider skipping. Make sure you hire a reliable home inspector, wait for your inspection report, and watch out for these red flags. 

Reasons for FHA Refinancing

Interest rates started to decline in 2019 and still seem considerably low. The average rate for a 30-year, fixed rate home loan has fallen from 4.94% in November 2018 to 3.13% in October 2021. A point drop in your interest rate could translate to huge savings with each monthly payment

FHALoan.com is not a government agency. We do not offer or have any affiliation with loan modification, foreclosure prevention, payday loan, or short term loan services. Neither FHALoan.com nor its advertisers charge a fee or require anything other than a submission of qualifying information for comparison shopping ads. We do not ask users to surrender or transfer title. We do not ask users to bypass their lender. We encourage users to contact their lawyers, credit counselors, lenders, and housing counselors.

SecureRights Advertiser Contact Information