Government Mortgage Loan Aspects

Government loans, while still automated, have their own guidelines, paperwork, and verbiage. That takes some getting used to. Granted, it’s not that big of a deal, but if a mortgage company only does conventional loans then you can bet they won’t handle your deal as efficiently (if at all) as someone who specializes in government loans. FHA grants certain status to mortgage bankers who are allowed to underwrite and approve FHA loans. Such status is called Direct En-
dorsement, or DE. If you determine that you need an FHA loan, the very first thing you need to ask the lender is if they have their DE approval from HUD. If they don’t, go elsewhere. If they have no idea what you’re talking about, go elsewhere. FHA lending is just a tad different from conventional, not a lot, but enough to slow things down when you don’t need them slowed down. FHA loan? Get an FHA lender.

Are you a veteran or otherwise qualify for a VA loan? Just as HUD grants special DE status to certain FHA lenders, the VA grants special status for VA loans in a similar fashion. If a lender is VA approved, then the process is streamlined. The lender approves the loan in-house, the appraisal is ordered in-house (compared to ordering it directly from the VA), and all approvals are done in-house.

For example, having Lender Approved Appraisal Process, or LAAP, allows the lender to do the appraisal without all the paperwork involved when ordering one through the Department of Veterans Affairs. If you want a VA loan, ask your lender if they’re LAAP approved. If not, again move on.

Once you’ve decided which type of loan you’re going to get, stand firm in your decision. Sometimes if a banker or broker can’t offer the loan you’ve decided on they’ll try and talk you into switching to something that they prefer. For example, say you call a lender and ask for a 3-percent-down FHA loan and they try and talk you into a conventional 3-percent-down loan instead. They’ll run the numbers, quote some rates, and try and convince you to go conventional instead of government. If this happens, simply ask them if they’ve got their DE approval from HUD. If not, then I’d be a little suspicious as to why they’re trying to talk you out of a government loan.

If you see that a lender or broker specializes in your type of loan request, then certainly include them on your list of prospective lenders. Lenders who specialize in government loans tend to do a lot of them, which will mean an easier approval process for you. Be careful though. Make certain that the lender who claims to specialize in VA loans also doesn’t claim to specialize in FHA, conventional, jumbo, first-time buyer, construction, bad credit, excellent credit, and so on. That removes some of the credibility in the claim when the lender specializes in every single loan on the planet. Specializes in everything? Please. I’m not saying they’re not any good at a VA loan, but wouldn’t you feel better about a lender who says, ‘‘we specialize in VA loans’’ without claiming that they specialize in everything else? Makes some sense, doesn’t it?