Reader question: “What is the process for buying a home with an FHA loan during the coronavirus pandemic? Has the FHA mortgage process changed as a result of the COVID-19 situation?”
We have received quite a few questions from readers regarding FHA loans during the ongoing coronavirus pandemic. This is the first in a series of blog posts that will address those questions. Today, we’ll talk about the process of buying a home with an FHA loan during the COVID-19 pandemic.
FHA Home Buying in the Age of COVID-19
In most states, if not all of them, the home buying process is allowed to continue on despite the COVID-19 health crisis. That’s because the real estate, mortgage and closing industries are considered “essential” businesses, since they support the nation’s infrastructure.
So, even though other types of businesses might be shut down by government order, the real estate business has continued on throughout the COVID-19 pandemic.
That answers the first question: Yes, it is possible to buy a home with an FHA loan, even as the 2020 coronavirus pandemic continues to drag on.
But there are some aspects of the FHA mortgage approval and closing process that have changed because of COVID-19. So let’s talk about some of those changes.
Getting Pre-Approved for a Loan
Before the pandemic, home buyers using an FHA loan to buy a house might have visited their mortgage lender’s office to deliver paperwork or sign documents. Those are common procedures during the mortgage pre-approval process — at least, before the whole COVID-19 situation occurred.
These days, the FHA pre-approval process is mostly done remotely. The same is true for other types of mortgage loans. Most lenders today are utilizing a 100% digital business model, to eliminate the need for face-to-face interaction and protect the health of everyone involved.
During the COVID-19 pandemic, FHA loan pre-approvals are done over the Internet and possibly by fax or phone. Most reputable mortgage lenders have secure websites or web-based portals where you can upload documents, submit loan applications, etc.
House Hunting Has Changed
Once you’ve been pre-approved for a mortgage loan, the next step is usually to start the house-hunting process. You can do this with or without a real estate agent. Most buyers choose to work with an agent, because it’s typically the seller who pays for their commissions.
The house-hunting process has changed quite a bit during the coronavirus (COVID-19) pandemic. This is true for home buyers using FHA loans, as well as other types of financing.
The biggest change is that there are no open houses being conducted right now. As you probably know, an open house is a situation where anyone can come through to look at the property. This creates a group setting where people from different households intermingle, increasing the risk of coronavirus transmission. Government guidelines prohibits open house situations, at least for now.
You might also have to sign a disclosure document before entering a house that’s for sale (electronically). These documents vary from one state to the next. But they all amount to the same thing. By signing it, you’re acknowledging that you know the risks associated with COVID-19, and that you are not feeling any of the symptoms associated with that disease.
You should also have access to hand sanitizer when visiting homes for sale. The listing agent might provide other protective gear as well, including gloves and disposable shoe coverings or “booties.”
Aside from these factors, buying a home with an FHA loan during COVID-19 works the same as it always has. You find a property that meets your needs, evaluate the asking price, and submit an offer in writing. Your real estate agent will probably submit the offer / purchase agreement digitally, for the reasons mentioned above.
FHA Home Appraisals During COVID-19
As a home buyer, you will not be directly involved with the FHA home appraisal process. It will be conducted by a HUD-approved appraiser who is hired by the mortgage lender. There’s no need for your involvement at this stage.
Still, you should have a basic understanding of how the FHA appraisal process works during COVID-19. And there have been some significant changes in this area.
The Department of Housing and Urban Development has made some adjustments and allowances for FHA home appraisals, due to the coronavirus health crisis.
The biggest change is that appraisers can appraise the property (and determine its market value) without even seeing it firsthand. They can conduct what is known as a “desktop-only” appraisal, or an “exterior-only” appraisal where they view the property from the street.
Underwriting, Final Approval and Closing
During the underwriting process, you might have to provide additional documentation or even a letter of explanation so that your loan can be approved. As with other steps in the process, this will most likely be handled digitally without actual paperwork trading hands.
As for the closing process, you can expect more of the same. FHA home buyers can complete the closing/settlement process remotely, by reviewing and signing documents in digital form.
The mortgage industry has been moving toward a more digital and paperless process for a few years now. The coronavirus / COVID-19 situation has accelerated those efforts. These days, almost everything can be handled electronically. This allows real estate transactions to move forward while safeguarding public health at the same time.
What’s interesting is that the COVID pandemic has altered the process for mortgage transactions in a way that consumers really enjoy. So the modifications put in place over the past few months might remain in place even after the health crisis subsides.
As Quicken Loans vice chairman Bill Emerson put it: “What that’s cascading into is a marketplace where the consumer gets used to a digital closing.”
This article provides a basic overview of the FHA mortgage loan and home buying process during the age of COVID-19. In future articles, we will zoom in and examine some of these topics in more detail.