Final answer:
The different types of underwriting found in FHA mortgages are automatic underwriting, manual underwriting, and direct endorsement.
Step-by-step explanation:
There are three types of underwriting found in FHA mortgages:
- Automatic Underwriting: This type of underwriting uses an automated system to evaluate the borrower's creditworthiness and determine if they meet the FHA's lending guidelines.
- Manual Underwriting: In cases where the borrower's credit history or financial situation does not meet the requirements for automatic underwriting, the FHA allows for manual underwriting. This involves a more thorough review of the borrower's financial documents and credit history by an underwriter.
- Direct Endorsement: This type of underwriting is done by approved lenders who have the authority to underwrite FHA loans without prior approval from the FHA. The lender assumes the risk and is responsible for ensuring that the loan meets FHA guidelines.