Approved Lender

• The FHA doesn't work with every lender, everywhere. The FHA requires lenders to request approval, go through a financial audit and receive approval prior to offering any FHA loans. The lender agrees to underwrite and approve mortgages based on the FHA's underwriting guidelines. In exchange, the FHA insures the loan against losses if the homeowner defaults on the loan and the lender forecloses. The FHA requires the homeowner to pay mortgage insurance on the loan, which FHA uses to fund this insurance. Before refinancing a duplex into an FHA mortgage, the homeowner must find an FHA-approved bank or lender in his state.
  
  

Apply for the Loan

• Each state has hundreds of lenders approved by the FHA to provide FHA financing. The homeowner should obtain quotes from several different FHA approved lenders and negotiate the best deal possible. Once the homeowner negotiates the best deal, she then applies for the FHA loan with the lender. The FHA requires certain documents to be filled out and completed by the borrower, and requires the lender to provide several FHA disclosures along with the application.
  
  

Document Your Finances

• The FHA requires the lender to document the borrower's ability to repay the mortgage. Usually this means the borrower provides pay stubs, if he's employed; tax returns, if he's self-employed; or other documentation, if he receives other non-employment income. If the homeowner has owned the duplex for more than one year, then the rental income should be reflected on his tax returns. The lender should review the tax returns and use some or all of the rental income to qualify. During this process, the lender will also verify that the homeowner actually occupies the property. The FHA, as a rule, only finances owner-occupied properties. If you don't live in the subject property when you sign the application, then you aren't eligible to refinance it with the FHA.
  
  

Close the Loan

• Once the lender reviews the loan, approves all your financial information and obtains all the necessary documentation, he then approves the loan to close. The lender schedules the closing with the homeowner. At the closing, the borrower signs many different documents which obligates him to repay the lender. The lender provides money to the title company, which in turn pays off the existing loan and files the new loan with the county. The lender then sends the file to the FHA for them to place insurance on. The FHA issues the insurance, the homeowner makes the payments and hopefully, the lender never needs the FHA insurance coverage.