May 17, 2022

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FHA Loan Approval or Rejection: The Rules


FHA loan rules cover a lot of ground, including specific procedures that are supposed to happen when an FHA single-family mortgage loan is approved or denied. Did you know the FHA loan rules, listed in HUD 4155.1, give instructions on how approvals and rejections are handled?

Those rules are found in Chapter One, Section A of HUD 4155.1. When an FHA loan application is approved, the rules instruct the lender:

“When a borrower is approved, the Direct Endorsement (DE) underwriter

• records the results of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary

• enters any modification of the mortgage amount or approval conditions under “Underwriter Comments” on the form, and

• approves the borrower and authorizes closing, if the case is a DE case.”

The phrase “direct endorsement” refers to FHA loans the lender can close automatically without referring to the FHA for assistance or approval. Some loans cannot be handled with direct endorsement–a topic we’ll cover in future blog posts. FHA loan rules add,

“The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision. The term of the firm commitment or underwriter’s approval of the borrower, on page three of form HUD-92900A, HUD/VA Addendum to Uniform Residential Loan Application, is 90 days or the remaining life or whichever is greater of the

• Conditional Commitment
• U.S. Department of Veterans Affairs (VA) Certificate of Reasonable Value (CRV), or
• underwriter’s approval of the property, as appropriate.”

What happens when a loan application is rejected? In such cases FHA loan rules require the following, according to Chapter One:

“When a loan is rejected, the lender must immediately complete

• a rejection notice consistent with the requirements of Regulation B and,
• when required, an Equal Credit Opportunity Act (ECOA) notice, forwarded to the borrower.”

At least one credit aspect must be rejected before the lender can issue an overall rejection. The rejection notice must provide specific reasons for the rejection. Delinquent credit accounts need not be listed. The rejection notice must contain all the reasons for denial/ineligibility and any counter proposals to effectuate loan approval, such as reduced mortgage amount.”

For more information on these procedures or how they work, contact the FHA directly.

Do you have questions about FHA home loans or refinance loans? Ask us in the comments section.


Joe Wallace - Staff Writer

By Joe Wallace

June 18, 2013

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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