When a borrower fills out an FHA home loan or refinancing loan application, some may be tempted to leave out unfavorable information or provide documents to the lender that are not as up to date as they could be, but reflect more favorably than the most current information.
When applying for a home loan, honesty is definitely the best policy–FHA loan rules published in HUD 4155.1 require the lender to exercise due diligence where this information is concerned. Chapter One Section B of HUD 4155.1 instructs the lender:
“The mortgage loan application package must contain all documentation that supports the lender’s decision to approve the mortgage loan. When standard documentation does not provide enough information to support the approval decision, the lender must provide additional, explanatory statements that are consistent with information in the application. The explanatory statements must clarify or supplement the documentation submitted by the borrower.”
As you can see from that statement, it’s the lender’s responsibility to make sure all data supports a decision to approve the FHA loan. But the rules don’t stop there–they go a step further, telling the lender:
“At loan closing, all documents in the mortgage loan application may be up to 120 days old, or 180 days old for new construction, unless
• a different time frame is specified in this handbook or in other applicable HUD instructions, or
• the nature of the documents is such that their validity for underwriting purposes is not affected by the prescribed time frame, such as
− divorce decrees,or
− tax returns.
If the age of documents exceeds the above limits, the lender must obtain updated written verification of the documentation.”
Borrowers who have concerns about missed payments, income verification or other areas that require the lender’s verification should discuss their needs with the loan officer. It’s far better to discuss a situation directly with the loan officer rather than to omit verifiable data and hope it won’t be noticed. The lender’s contact with credit agencies, employers, and creditors usually reveals the “big picture” of a borrower’s creditworthiness–knowing that up front can be a big help when filling out the FHA loan application.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.