What Is an FHA Direct Endorsement?

Prospective homeowners can purchase a home easier and more quickly through a Federal Housing Administration, or FHA, direct endorsement. This mechanism allows them to secure mortgage insurance directly with a HUD-approved lender. Direct endorsement enables lenders to consider borrowers with less than perfect credit by protecting lenders against loss in the event of default.

Eligibility

Low- to moderate-income families must meet income requirements established by the federal Department of Housing and Urban Development (HUD) to qualify for a HUD insured single-family mortgage. The ability to meet monthly mortgage payments is required to apply to a HUD approved lender that uses direct endorsement.

Lenders

Banks, mortgage companies and savings and loan associations must meet HUD's criteria to be considered an FHA-approved lending institution and use the direct endorsement process. Criteria include a minimum of five years originating single-family mortgages.

Time

Since single-family FHA mortgage applications can be considered by direct endorsement lenders without first submitting paperwork to HUD, buyers experience a shortened approval process.

Considerations

Buyers considering the purchase of a foreclosed property should be advised that some lending institutions require a direct endorsement lender for consideration of an FHA mortgage.

Functionality

FHA insures loans so that lenders can offer low down payments, low closing costs and easy credit qualifying to first-time buyers, seniors and home remodeling purchasers.

References

• FHA: Mortgage Insurance Programs