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Sellers !!! Ignore what your listing agent tells you about FHA loans !!!

angry and upset

FHA mortgages, such a very very bad thing. Don't do it... Don't allow your buyers to utilize this program. Don't allow your seller to accept offers with FHA mortgages. They are very very bad....

HOLD THE PRESS !!!!.. Wait one second. In the real estate and mortgage industry, don't we get angry when someone offers their professional opinion on a topic or question that they don't know much about. That their advice could be an assumption, or from prior years, or from a bad experience?

PS. my initial comments above was a joke. FHA loans aren't a bad thing at all and I am angered by those that say otherwise. In many cases, FHA loans are much better than conventional loans. Please read: FHA loans vs Conventional loans

Sellers, fire your listing agent if they tell you not to take an FHA offer !!!! They could be costing you lots of money. Unless you just don't care about throwing money out the window, this is extremely poor advice. PS... fire an agent if they tell you not to accept any type of offer that is part of any type of financing that you might not agree with. ie.: VA loans, FHA loans, USDA loans, conventional loans, etc, etc.

FHA loans

So what sparked this blog? The reasons are these two comments from a recent blog comparing FHA loans and Conventional loans. Amd keep in mind, these 2 comments are coming from realtors defending FHA mortgages.

Chris Olsen wrote this comment : Comment by Chris - He states that a seller accepted a conventional offer that was $10,000 less than his clients FHA offer.
Karen Crowson wrote this comment : Comment by Karen - She states the bias opinions from other realtors.

Here are the false assumptions about FHA loans :

Only for first time homebuyers

for those borrowers with poor or bad credit

for those with no money

FHA loans take a longer time to process or close - FALSE

they are more expensive, have higher fees and or rates. Again, False. Every mortgage lender has a profit margin, regardless of the type of mortgage. If someone is charging you more on a FHA loan, it's purely out of greed. Here is a good example. FHA fees and why I was charged more. Please read the 2nd paragraph.

appraisers are more difficult on the appraisals. This comment is so 2002 and prior. Yes, this was sometimes an issue back in the '90s. But HUD changed the appraisel requirements about 7 years ago. If the appraiser is very picky, that's not because of FHA. (I would love for some appraisers to chime in here and I will post your answers.)

You could have problems even with conventional appraisals now, because of the new HVCC rules that have been implaced with every lender. Darin Osenberg gives you feedback on these HVCC guidelines. Please read : HVCC and could it be trouble for conventional appraisals?

If you have 20% down, conventional is the way to go. FALSE.... it depends on your credit score. Please read this. FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check

a lender that is asking for more information that you expected, because it's an FHA loan. Or who wants another appraisal, etc, etc. These are not always because of HUD or FHA, but because of specific investor overlays. Just keep this in mind.

Conclusion : Pick your realtors and loan officers wisely and very carefully. We all should have your best interest at hand, as a buyer or a seller, but this is not always the case. Is this negative? Yes, but it's the truth and it's reality. Just do your research carefully and keep the emotions out of your decision. Sure, easier said than done.

Overall, these negative comments from realtors about FHA loans usually come from old time realtors that haven't left the 90's, from those new realtors that don't know any better, or just from someone that heard a comment by another agent. You know, that trickle down effect. If someone gives their opinion as a fact, sometimes that other person listening will do the same. Just beware...

PS... I don't make any extra money by promoting FHA loans. My job is to make sure that the borrower gets the best type of mortgage out there that suits their needs and goals.

RECOMMENDATION ?? Maybe have all sellers receive a booklet from the NAR or the local real estate associations / boards, describing the different types of mortgages out there. And that each seller has to sign the booklet, stating that they did at least receive it. I would bet this would be very educational, at least in my opinion.

Please read : FHA loans aren't a bad things and the reasons why.

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 07/11/2009 11:26 PM

Comments (74)

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Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: Sellers !!! Ignore what your listing agent tells you about FHA loans !!!

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74 Comments on Sellers !!! Ignore what your listing agent tells you about FHA loans !!!

JUL

I'm with you on this one Jeff. I called for a showing appointment and as soon as I said that the agent said...the seller isn't accepting VA loans. I ask why and he just said...because they aren't comfortable with VA Loan programs.

I wonder who explained that to them?

I would love for some appraisers to chime in here and I will post your answers. .. in regards to FHA appraisals vs conventional appraisals. Good or bad, your honest input. thanks

Hope you don't mind me inserting my chart but here are the Las Vegas Area May closes by sales type. You would be locking out 32% of buyers in our market if you didn't want to look at FHA offers.

That would be just plain silly!

Hi Jeff, this post has great info and links to clarify some of the misconceptions that are out there about loans.

Jeff,

Even one old real estate sage I know is recommending FHA currently.

Personally I loath the FHA but recognize the market for what it is. We have to do what's best for the client and today the surest loan seems to be FHA, so be it. Besides I know some good people doing FHA's and as you know I trust people I know not programs or companies.

I would have said educate not fire.

Bill

Of course a seller should accept an FHA buyer, their money is as good as anyone elses. With the constant changes in the mortgage lending industry, real estate agents should have their buyers or sellers consult with a mortgage officer when they need up to date, accurate advice.

The last offer I wrote (there were three on this property) got bumped for an offer of less money. The only difference was that mine was FHA and the other was conventional. Unfortunately, we've been having a lot of problems with them down here, especially wacko appraisals. And if they do get two appraisals at or over the contract price, they've been requesting a third. Like they really want problems.

SALLY... . that just plain sucks that a realtor would say that of a seller. Why not educate them? Are they afraid to lose the deal? Maybe they should have the seller speak to a few lenders to get educated. Thanks for sharing.

RENEE..... . no, I have no problem with you inserting that chart. I think it's awesome and explains much, at least when it comes to the buyers. PS.. where did you make that chart? In any case, thanks for sharing this.

ANN..... . I still can't believe how many misconceptions that are still out there. It does blow my mind away. And thanks for the kind comment.

WILLIAM aka Bill..... . well, that's good. I still don't know what you don't like FHA loans though. You keep mentioning this, but I don't think you have ever given me a good reason why. But yes, it just comes down to educating both the buyers, sellers, and real estate agents... and sometimes, the loan officer. Thanks for your input.

Our area is seeing a lot of FHA loans and so far not a lot of problems. Informative post with links to help people resolve some of their misconceptions.

JON.... . I agree 110%, hence why I decided to write this post. And realtors should even have their sellers consult a very good, professional loan officer about the differences also. Not just the buyer..

PATRICIA... . are you saying that you are having problems with wacko appraisals on the FHA side? Just overall? Lenders wanting 2 FHA appraisals? Just trying to clarify your comment. thanks for your input.

ED.... . problems will usually occur on either a FHA loan or a conventional loan because of the loan officer or not the lender. It's not the mortgage program itself... at least in my opinion. Yes, we need to resolve these misconceptions. thanks

Jeff,

I only added that because you and I have been going around and around with this isssue for nearly three years now.

I had stopped using FHA single family loans in 1974 because even then there were better choices for almost everyone! They were simply bad loans! That's not the case any more currently today you can't serve your client well with out seriously considering FHA. Strangely FHA with all it's faults is possibility the best available loan on the market for many people.

I did battle successfully with HUD-FHA so often that they used me as a consultant to resolve problems. It's a long irrelevant story involving apartments not SFR. What I have found is that there is no agency except the IRS that has more distaine for people than HUD-FHA. Only the Bureau of Indian Affairs has done more harm than HUD-FHA! HUD is responsible for the majority of urban ghettos.

It all comes down to every thing I've done since leaving the bank so many years ago has been as a people centric fiduciary agent. As such recommending against FHA was the right thing for most of my clients. students and readers at the time, just as recommending it is today.

Bill

Jeff - I haven't done an FHA or VA loan for a couple of years. I appreciate all the information and tips...we all need help when it comes to financing, Thanks,

Jeff: Thanks for the post. I rarely run across what you're referring to. Perhaps agents are more open-minded up here. They certainly trust me to do my job which is nice. Again, most of my loans are conventiional these days but that is due to credit scores and generally low loan-to-values. Thanks again!

Thats right Jeff... fire the listing agent if they get so involved with the mortgage process that they tell you NOT to accept a product. Sure, maybe tell them to do a loan comparison to ensure its the best option... but to tell them NOT do to it... just crazy.

WILLIAM.... . I only got into financing in 1992 and have been doing FHA loans since 1993... I wasn't doing mortgages in the 80's. But I am trying to understand how you could say FHA was even worse in the 70's and or even the 80's, when they allowed for a lower down payment even back then than conventional.

My opinion on this is that you have something against HUD themselves and what ever took place in the past, maybe about some specific issues. But FHA financing, to say that it was really bad and to recommend to most of your students and such, that FHA was not good. I guess I would have to know what the scenarios were or reasons why. But this topic alone could be a book... but as always, thanks for your input.

REBECCA.... . I don't think not doing a FHA loan or a VA loan in the last year is a bad thing. Each real estate market is different from each other. I just feel that we need to educate both the consumer and the realtor. I find it very disturbing when a realtor tells a seller not to accept FHA or VA financing. If the buyer can buy the house, who cares on what program. Sure, FHA appraisals were worse in the 90's, but that is not the case now, not in this market place. thanks

PAUL.... . I don't even run across it often, but I hear about it often from other buyers or realtors. And keep in mind, I myself, lend in about 6 states. So it's just not my local real estate market. And the two realtors that made these statements, the examples that are in my blog, are from Ohio and California. Two totally different places.. but I am confused by your last comment. You said, "Again, most of my loans are conventional these days but that is due to credit scores and generally low loan-to-values. thanks for stopping by.

JOHN.... . hell ya... I am sorry, but they should not be in the real estate business, period. Leave the financing up to the pros, the professionals. Sure, there are some loan officers out there that don't fit that.... but to say no, accept a program just because. Or because they were at a settlement table that the buyer had a bad experience with that specific type of loan? hhhmmm, maybe it was the lender at fault? For any delay? etc, etc... thanks for your input.

There are a lot of idiot realtors in this business.......

I mean, come one, this isn't your father's Oldsmobile(if i have to explain it, it isnt funny)

What is just as bad as a listing agent refusing FHA/VA..... is buyer's agents who don't ask why.....

Jeff - Great post and what a great idea to print out the information about mortgages and givig them to a seller. I agree that it would give them a tremendous insight into the financing options that are out there.

Great stuff Jeff! Education is key and realtors really need to be sure they are teamed up with the best originator because there are way too many factors involved in obtaining financing. The trickle effect can really be harmful!

This is excellent, Jeff. The big issue here for many first time buyers is the condo ownership percentage. And we do see a fair number of listings where there say NO FHA but no reason (I am working with several FHA buyers right now). I think your point is right on target that some agents just do not understand the FHA loans and are making recommendations that are unfounded.

Jeff

I have always liked FHA loans. Yes, it does have a few quirks but I know most of them and know how to avoid properties that may not qualify for the loan or at least find out enough information in advance to make sure the property will qualify for FHA before proceeding. I think sellers should understand more about the loan process for a potential buyer.

Good post! I know that I would shy away from FHA loans years and years ago, but in today's market they are perfectly acceptable and in my experience, do not take longer to process compared to a conventional loan.

We're seeing a lot of that here, with many sellers/agents not accepting FHA deals or preferring conventional.

It is amazing that when someone does not understand a program, they are fast to discourage others from using it.. Not a good thing

Jeff, good grief in some of the markets out there I would think they would love to get any kind of offer. I actually have had no problems with FHA loans. Not sure what they are talking about.

TOM.... . and many idiot loan officers also. But wait, can you explain the Oldsmobile thing? Or maybe it's just too late for me or a Texas thing... lol Seriously though, if a buyers agent was told this, I sure hope they would ask. But I wonder if the listing agent would say why. Wouldn't that be in violation of something? Some time of code or standard?

DONNA... . I am seriously thinking about writing a book and have been introduced to a publisher by another realtor that suggest it. This would definitely be in that book. And thanks for the compliment.

MARK..... . yes, education is beyond key, especially in today's market. But I don't care if a realtor is teamed up with a good loan officer or not, meaning the listing agent. Just that they shouldn't be giving advice on what types of financing... and if they are second guessing something, maybe have the seller request the buyer to just talk to their person... nothing more than just a quick interview per se. A second set of eyes. Thanks for that polite compliment.

JEFF.... . even more of a concern, if agents are saying no to FHA and it's financing for a condo. This is even harder for a conventional loan, if not on the approved condo list. Easier to get a condo FHA approved, depending on the DU findings, the automated underwriting findings. It has to come down to the agent not understanding FHA and just assuming. Or as Tom said, then they are just idiots. ;o) Thanks for the compliment.

LESLIE.... . there is a huge key to success in regards to FHA... having a good understanding of what properties might not go. If the house is a wreck, an FHA appraiser will have a field day. But then again, depending on what the appraiser sees, it could have a problem with a conventional appraisal also. And yes, the seller should know more about the difference between FHA and other loan programs, and not just take the word of the realtor.

JUL

KERRY.... . Even years ago, they were still a great option. At least in the 90's... Many homes were in good shape. What some people got ticked about in regards to the FHA appraisals that mentioned items such as, missing hand railings, broken glass, and chipping/pealing pant.... that it could kill a deal. Well, in all honesty, why would I want to buy a house that had broken windows and chipping paint. Unless I received a price discount... but yes, the overall process is long now for any type of loan, and longer with some lenders in general, no matter what loan program. And thanks for that compliment.

CHRISTINE.... . that's not good at all. It sounds like they should put all of the realtors in your area into one room and have a very knowledgeable loan officer give the ins and outs of both FHA and conventional, so they can advise their sellers properly.

ROLAND.... . not at all, hence why I decided to write about this again. And what is more frustrating is that this is coming from a listing agent, who sells houses. Yea, it's easy to assume, but what if your last 2 FHA closings went bad just because of the loan officer and or lender, because they didn't know what they were doing. thanks

LARRY.... . yea, you would think that. But I know some realtors can be very convincing and or stubborn, just to make it look like they know what they are doing. Just like how a lawyer drags something out or creates a problem or questions something on the real estate transaction that doesn't need to be questioned, just to justify their fee. This is where we truly need better education for both the listing agent and the seller. thanks

Jeff: Yes, I figured that your first paragraph was a joke, or a come-on. Unfortunately, I think there are many, many Rainers who never read anything MORE than the first paragraph. But, then again, maybe they aren't doing much business anyway, so perhaps no harm was done.

Great post... lots of great ideas. I use FHA financing often... but I always have. But, then again, most of my transactions have always been within the FHA loan limits... even before the were raised.

Jeff: My policy is not to get angry and to take any loan that comes with a pre-approval. Thanks for the info.

Hi Jeff.

While you beat some realtors ® over the head we are prohibited from beating each others' head per the "Code of Ethics" and we have to stick to our realm of expertise. However your title is deceiving, "Sellers !!! Ignore what your listing agent tells you about FHA loans !!!" Okay... so you are a mortgage professional who titled your post this way purposefully... for whatever reason: SEO/controversy/etc. and the post will most likely pop up for "listing agent FHA."

Obviously if a listing agent encourages the seller to accept FHAs then that is not applicable. Sellers may want to listen to their listing agent. For my clients when applicable I suggest cash, conventional, FHA, and/or VA depending on a variety of factors. FWIW many listings in our local MLS include FHAs and VAs. Money is money.

"PS... fire an agent if they tell you not to accept any type of offer that is part of any type of financing that you might not agree with. ie.: VA loans, FHA loans, USDA loans, conventional loans, etc, etc."

Unfortunately some controversy sells at the expense of disparaging realtors ®. Great job on disparaging realtors ® in order to elevate yourself BUT this advice may not be wise. Some agents have their mortgage broker license too so they may be qualified to give their professional opinion about mortgages. Broad generalizations whether about realtors ® or about firing someone is just so not good....

good blog Jeff.

The problem you speak of has become less of an issue here in Dallas, but i still hear it from time to time. Especially from agents in parts of Dallas where the combination of higher loan limits and lower values has opened up markets to FHA that were once strictly conventional. Although FHA appraisals can be more strict with regards to a few specific repairs in some cases (chipped paint and a garage door issue are two that i have run into in the last few months), the bottom line is that completely eliminating it or discouraging against it without all the facts is crazy as you say. Plus the majority of those issues are relatively minor and can be resolved very easily. I can't think of ONE loan that didn't close because of an FHA VC condition. BUT I can think of SEVERAL that didn't close because of the awesome HVCC process that we're all graced with right now.

One thing i want to add...I AM noticing more listings that say "NO 100% FINANCING ALLOWED!". Awesome, you just excluded all VA, USDA and bond programs because you got burned on one 100% conventional deal that went south two years ago. Not a wise decision.

hopefully this HVCC moratorium will happen sooner than later. If not, i suspect some agents will be banning conventional financing here soon! makes more sense to me than banning FHA in this market, although i still wouldn't recommend banning either.

Jeff:

Your post was overly strong in tone, but right on the mark otherwise.

FHA has a welfare-like ring to it for some folks. The bigger and more expensive the home the more likely a seller might hold that opinion.

But mostly, sellers are wary of costs. Its a listing agent's duty to supply facts instead of dogma. Those costs are best viewed as a function of price.

At the lowest price ranges this year, FHA may have amounted to 75% or more of total sales here. Turning away that fraction of total buyers would surely be unwise. An agent who recommended against FHA in that context probably should be fired....or sued.

The only thing the seller should care about is the net proceeds.

Of course, there is the matter of the viability of the buyer and likelihood of getting loan approval and appraisal.

There are ways of improving the likelihood of getting our offers before the seller. I'll write something about this.

The seller should be educated about FHA loans and I like the idea of giving them a booklet.

Great information about FHA loans. . after all they have resurrected lately

Jeff, I posted yesterday to both of my blogs the news that more than 1/2 the homes sold in my county that were financed were using FHA & VA mortgages. If a seller ignores this and chooses to NOT entertain an offer from an FHA or VA purchaser they will be sorry.

Haven't had a listing agent in my area do this, nor to I. FHA are the primary way folks are financing in A2. Since the 80/20, 90/10 went away that is the strongest loan around. I do have "lenders" tell me they take longer and we are putting the closings 45 days out now.

How long are you telling your Realtors to put the contracts out?

No one here has done this that we have run into....realtors need to know that they don't know and in this case...had best find out...Ignoring any buyer who is qualified is a HUGE mistake !

FHA loans are used a lot here, but average home prices are lower here too. Conventional is more likely to have a low appraisal than FHA. I tell my buyers who haven't selected a mortgage co to interview loan officers and tell them they are shopping around.

One question is are you sure the seller to ignore what the agent tells them?...seriously...what about if the information they are giving them is accurate? Should they still ignore it? Maybe the title needs to be explained to people who might not underatand what you mean.I just sold one of my listings about 3 weeks ago and it was the first FHA loan I've done in almost 14 yrs in the business. Probably because they weren't very common. At least not in the areas I sold in NY and then when I moved to FL the 100% financing was big.Of course...I bleieve that I'm seeing more of them because it has taken the place of those crazy no money down loans. I did have a listing that had 2 supposedly FHA approvals from the buyers LO but they always came up with issues and couldn't close so maybe they needed to fire both their Realtor and their LO for telling us it wasn't going to be a problem or was given false information. The one we just closed went pretty well and the LO even showed up at the closing which for me is rare to see and it was also a first time home buyer.

I've also closed on a few VA loans back about 5 yrs ago and they were also considered complicated...but on the deals we did they seem to go through fairly well..accept when I saw the buyer yelling at their LO because their rate was changed at the table...but that can happen on any loan.

Jeff, I LOVE working FHA loans. Simple, easy! I have closed more FHA loans in 11 years than any other type. Why someone would say not to go FHA as a choice is beyond me, unless the home truly doesn't qualify for an FHA product. What works best for the buyer should be the loan we agree upon.

As for Lana's comment above: The dreaded Realtor/Mortgage Broker Scenario. Again, in 11 years I have only worked ONE transaction where that went smoothly. At the closing table, it is typically very apparent that the buyer took it in the pants with their Realtor/Mortgage Broker. I know there are a few agents that wear both hats well. Notice a said a FEW. Seems like it could be a conflict of interest to me.

Looking forward to reading your comment on Lana's comment, LOL.

You are 'da bomb!

WHen I first became licensed, I was coached to tell sellers we HOPE we don't get a FHA loan buyer. I now know that was incorrect advice!

KAREN.... . don't get me started on the part about reading the whole blog, let alone the first paragraph. One argument about FHA loans is that the limits were lower. Okay, that is understood... but if it does work for the buyer, why ruin the offer from the listing agents side, just because they are assuming.

MATT.... . I get angry when I hear stories of sellers not accepting a specific type of offer just because their agent told them not to. Sorry, but realtors should keep to their job. Especially since they don't know much about the buyer and or the file. Thanks

Jeff - 50% of my closings this year so far were FHA loans - they are just fine in my book :o)

Jeff: Your title really got my attention, as the FHA loan product is such a good option and many times the only option for many of our buyers. A class I just attended rolled out much information about the newer FHA products. FHA is still the loan product of choice for many buyers.

LANA.... . beating people over the head? Okay, I guess I do that from time to time. But in today's market and society, it is sometimes the only way to get someones attention. And I love anyones opinion, but to say that my title was decieving, but not really tell me why? My title had nothing to do with SEO. Sorry, but you just made an assumption, just as some agents make assumptions about FHA loans and other types of financing. My title was to get peoples attention. I actually know what titles to give my posts to get better SEO searches. I am not a pro, but I have a good idea and have done well with that. But that is a whole other subject. But I will say this, you have made my point in regards to assuming.

Overall, you have confused me with your comments. You sound like you are arguing both sides, telling me one is better than the other, and then switch sides. You made this comment....

"Obviously if a listing agent encourages the seller to accept FHAs then that is not applicable. Sellers may want to listen to their listing agent. For my clients when applicable I suggest cash, conventional, FHA, and/or VA depending on a variety of factors. FWIW many listings in our local MLS include FHAs and VAs. Money is money."

I never said to encourage anyone. Besides, by telling a seller not to accept an FHA offer, didn't they kind of encourage them not to.?? ANd my arument in this post are those realtors that just have no clue and give bad advice. Please read some of the comments in this post by both realtors and loan officers. Many will agree with that statement. Then you go on to say... "for your clients when applicable, I suggest cash, conventiona, FHA, VA, etc, etc."

When applicable? When is that? Do you truly know? What facts are you using? What do you yourself need to know to give that advice to your seller? Sure, a realtor can suggest against FHA if the house is bad shape. But do you know how bad or what is bad? Are you an appraiser? Or do you think you know or just assume? What ever happened to the loan officer, if they are good, knowing what is best for the buyer. The listing agent gets to make that decission?

AGain, I will come back to this and try to diciper your comment, but I am semi confused. You semi attack me and my title, that I encourage agents to accept FHA offers. My point to this blog was to let sellers know that it could cost them more money to listen to their agent telling them what to do or not to do when it comes to financing. Just because you might have been in the business for a while, doesn't mean that you can give that advice. And I am just assuming. Because people will listen to you. People will listen to me. But what happens if I was 110% wrong? I gave wrong advice. Would you listen to a doctor giving you advice on accounting issues? Please answer that one and I might understand your line of thinking. Another question... would you listen to a heart surgeon that is giving you advice on brain surgery?

Lastly, you said this.... "Unfortunately some controversy sells at the expense of disparaging realtors ®. Great job on disparaging realtors ® in order to elevate yourself BUT this advice may not be wise. Some agents have their mortgage broker license too so they may be qualified to give their professional opinion about mortgages."

You can call it what you want... but I am not trying to sell anything here. I am trying to educate. So, I am disparaging realtors? And what does that realtor do to the seller when they tell them not to accept a certain offer with a specific type of financing offer? What's that called? Just curious...

In regards to some agents that have their own mortgage broker license also? LOL .. sorry, not laughing at you, but those that have both a realtors license and a mortgage license. Many, and I will say many, aren't qualified to do both. Yes, this is my opinion, but many of the realtors that have argued my FHA vs conventional comparisons in the past, were also a loan officer. And I found one main issue, they didn't know how to read a rate sheet. I will be writing another post on this. This is my opinion, unlike your statement, but I would say that many aren't qualified to do both, especially in today's market, when you need to be on your toes because of all the changes. Even the average loan officer in this business are just that, average and shouldn't really be in this business.

I do appreciate your comments and input. But for someone that tells me in a certain way that I am assuming, you make many assumptions yourself, but with no back ups to your statements. I will be back, more on this later. And now I will be writing a blog about the loan officer who is a realtor issue, vice versa. thanks

I don't know one agent that would say this - if so they shouldn't even be allowed to practice!

After reading many of your comments, I do want to second your opinion that FHA loans do not take longer. Not at all. In fact considering HVCC and the current change in conventional loans and more importantly MI guidelines, FHA may actually take less time. I think those brokering loans may say FHA takes longer? In this market FHA is well more than half of my business. Great comments above.

Jeff's Readers,

Jeff got your attention! I wouldn't have said "fire" but it did a great job of getting you attention. Do you have any idea of the good that harsh headline did?

Jeff doesn't understand my feelings about FHA, but allot of older home owners do and if they don't stay on top of the mortgage market they may not know even I realize this not your fathers FHA!

Jeff's headline may well have saved/made allot of sellers money. In today's market you must consider FHA! Look at Renee's chart! I spent the last 20 years lending in Las Vegas, when I arrived FHA didn't make up 3% of the market now it's 33%! Are you prepared to give up one third of your clients potential buyers?

Jeff can't slap you up the side of the head to get your attention so that headline is a good second choice! If you feel like it hits a little close to home reread the article several times a day, you need it. If it doesn't apply to you pat yourself on the back and thank him he just made your job easier!

Bill

JOHN... . in reality, I didn't want this to become an issue about loan limits. if the loan limit is there and the borrower can get a FHA mortgage, then this fits. This is not towards you, but I want to keep this on point to why listing agents tell their sellers not to accept a FHA that comes with a FHA mortgage. That is my problem. If the house doesn't fit FHA requirements... or if the buyer doesn't, because it's outside FHA limits... okay. But, again, please read my 20% down comparison blog above. What happens if the purchase price with 3.5% down is out of that FHA buyers range, but they are putting 20% down... not all borrowers with 20% down should go with a conventional loan. Please read : FHA loans vs conventional loans with 20% down.

I will agree also that it ticks me off that some realtors are saying no 100% financing... damn, if I was a seller that knew what I know, I would be angry with that agent. Yes, what about VA loans and USDA loans. Great point. I didn't want this post to just be about FHA loans. Does a realtor really know that much better, to discourage or say no to certain types of mortgage financing? It would be like a loan officer doing the same to the buyer, just because they didn't have that program or understand some of the other programs. I have been up against this with other loan officers and how they sell. So misleading and just so wrong.

Lastly... yea, an agent banning conventional loans then also. They might as well stick this on all MLS listings then... CASH ONLY OFFERS....!!!!!! lol, yet some realtors just think they know better, no matter what. Sad... my opinion, but they should not be in real estate. Thanks for your feedback.

I've been in real estate (in one form or another) for over 25 years and I can remember back in the 80's when sellers did not like FHA/VA loans because of the rules that were in place then stated buyers could not pay for certain fees. There were certain fees that sellers had to pay for the buyers and many sellers felt like they were having to pay for the buyer to move into the house. As a closing/title agent back then, I can remember preparing the HUD I and having to make sure that the correct fees were on the correct side for the transaction. I can remember it taking a very long time to close those loans as well. The paperwork/approval process could take over 30 days back then. I don't remember not liking them, I just remember making sure that I had appropriated the correct amount of extra time needed for one.

FHA/VA loans are so different now than they used to be. The biggest difference being the removal of the fees that the seller had to pay for the buyer. Most of the loans that I see here are FHA due to the low downpayment requirement. It's one thing that we try to verify when we list the house...will the property qualify for FHA/VA financing. We want to make sure that we can offer it because it is good for our buyers. We also have some very good loan officers/mortgage companies that can do these loans in the same amount of time that it takes to do a conventional loan. And, since they have eliminated FHA inspections, it makes it easier. Everything is just taken into account on the appraisal and the appraiser lets us know what needs to be done. We haven't had any problems here.

If you understand the process and know what to expect and then educate all those involved, everyone should be able to handle the transaction. I know that we aren't afraid of using these financing techniques at all. These loans are good and if you are patient can be just as easy as a conventional. We had an FHA loan recently close in 3 weeks with one of my buyers (that included the appraisal and a few repairs that had to be done.) I thought that was great!

In my market where there are multiple offers on most homes, the FHA buyer will come in second 99% of the time. All things being equal (if the offers are within thousands of each other) the offers go to cash, conventional, FHA and VA (va might as well not even bother unless the seller is desperate.) It's just the way life works.

JIM..... .strong in tone? First off, it was for reason. Secondly, I think it was more than mild, but less than strong or harsh. In order to get some people to read or to listen, you need to be a little strong, yet polite. This goes back to common sense, teaching both kids or adults.... etc, etc. Not everyone will listen to polite reasoning, right? You tell me otherwise, then yes, my title and blog was strong.

We will both agree in regards to your last sentence.... "Turning away that fraction of total buyers would surely be unwise. An agent who recommended against FHA in that context probably should be fired....or sued."

But I will disagree about sellers and others being leery of the costs and such when it comes to higher priced house. If the peg fits the whole, then why reshape it. If it slides right in, then why tell someone differently. It comes down to education, educating sellers, buyers, and realtors.... I think the realtor isn't doing their job correctly if they give advice without knowing what they are talking about. The problem here is that some think they know, but they don't know. thanks for your feedback.

Jeff - I just had a buyer switch to an FHA loan because it was the better loan and had a lower interest rate, which I was surprised by.

Shop around, you gotta shop around I tell my buyers.

Patricia

The agents I here complaining about FHA haven't taken a continuing ed class about it in years. Far as I am concerned it is now an FHA world.

Jeff,

Good point about the loan limits AND the LLPA's. Went back and read that blog and that was explained very well. I didn't mean to get off track, but my point about loan limits increasing and prices falling here was to simply illustrate the fact that many areas (if not perhaps the MAJORITY) of D/FW is now a PRIME FHA market whereas it wasn't prior to the loan limit increases and falling prices. Picture loan limit increase from 200K to 271K with a median SP of around 220K and you get an idea. But you're definitely right to point out that the LLPA factor makes even 20% down conventional loans a less attractive option than FHA. I hadn't considered that as much of a factor with regards to this specific issue as much as i should have, so thanks for the insight.

One more thing...here's a link to that mortgagee letter that eliminated many of the old repair conditions. Thought it might be helpful to some folks...

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/05-48ml.pdf

There may have been some other updates that i'm not thinking of right now, but this is the big one.

With the new loan limits and falling prices FHA is the best loan available and I recommend it highly.

LENN.... . bingo, the net proceeds. The end result. I am glad someone came out and gave an answer to what I thought most of us strive for. Sure, there are always those chances that the deal could fall apart, but you shouldn't pit one type of loan against another. Gee, I closed a deal for a realtor in Florida, whose client was with another lender for a conventional mortgage. And imagine that, not even did they miss the settlement date and 2 extensions, but they denied it and it was a conventional loan. Well, I had it approved in week.... and yes, I did it as a conventional loan. My whole point, the emphasis should not be on the type of loan... but what is the best deal that you could get for your client, in the monetary sense. thanks and I look forward to your follow up blog on this subject.

GITA,...... . I agree that the seller should be educated. In some of the examples that I included in my blog, the agents just told the sellers what to do, killing some better offers, just because they were offers with FHA financing. This part angers me and I feel that the listing agent didn't do their job properly. And thanks, I think some sort of booklet for sellers would be good, just as buyers are suppose to receive. thanks

FERNANDO..... . even though they just recently have come back, this has been the same since I have been in the business since 1992. It should not matter the amount down or the type of financing. I just recently saw another lender deny a guy putting 20% down and I still got it approved. Yes, loan officers need to know what they are doing, but you can't be looking over your shoulder on every offer. As Lenn stated, the agent should care about the net proceeds .. and I agree. thanks

KRIS..... . I truly agree that they will be sorry. But from what I have heard and seen, many sellers make these decisions on what kinds of offers to accept because of their agent. I blame the agents here... it's black and white... and sad in my opinion. Thanks for the stats and the feedback. I hope more sellers read this.

Jeff, You have got to be one of the hardest working people I know. Only one time have I seen you give up on an FHA loan (after running it by 17 other lenders). We found out it could not be done, not because of the buyer but because of the property. Hopefully that will be going to closing with owner financing very soon.

Jeff, It is generally not an issue in New Orleans. People want to get things sold and many times they have little choice. Agents used to badmouth FHA but that has disappeared over time. If you read your blog you you ill learn that the FHA loan is a great tool.

Great post. I am working with more the 40 FHA preapproved buyers right now. I hear a few times a week from one of them that a listing agent doesn't want to accept an FHA offer for one reason or another. And so the process of educating another agent begins.

No FHA=Not much work here in Northeastern Ohio. Thanks for clearing this up - so many people go off the deep end with very little correct info!!

JUL

MISSY.... . It's good that realtors haven't done this in your area. I remember those 80/20's... some were good, others were bad. But the borrower sometimes didn't care or know, just so they didn't have to put money down. As far as our closing times. I can still close loans 30 days or less. I just closed one last month in 9 business days. Sure, it was a rush, because I took the loan from another lender. But it can be done if needed. Sure, things come up and or happen. But what kills me is that most loan officers know of the problems earlier, not the day before settlement. But again, it just depends on the issues and when they were found. Just my experience on this issue.

SALLY & DAVID.... . that's good news that realtors haven't done this in your area. Or that you don't know. If I was a realtor doing this, why would I even tell anyone this. Couldn't you report them to the board then for discrimination? hhhhmmmm... food for thought. But I agree, ignoring any kind of buyer could hurt the seller. But unfortunately, many will listen to their realtor.

SARA.... . sure, lower home prices allows the buyer to fit under the FHA loan limits, depending on the area. But I will have to disagree about your next statement though. You said.. "Conventional is more likely to have a low appraisal than FHA."

An appraisal of value is just that, of value, whether it's a conventional appraisal or a FHA appraisal. This shouldn't make a difference and I am just curious on how you came up with that. Again, just curious. Overall, listing agents should know what kind of advice they are giving and why, and not just because they heard it from someone else. thanks

FHA loans take longer? Not anymore

FHA loans don't always close? Neither do conv

FHA loans require the seller to pay a bunch of fees? Uh, maybe 1 fee under $100.... pfffttt

For those that don't 'get it' about what Jeff is talking about..... You need to read more of his blogs. THIS IS HAPPENING STILL!!!!

I wish real estate agents had to do more training an maintaining of licensing..... this would weed out a lot of part-timers who propogate this.

Jeff,

My sister, a first time home buyer, will be closing on an FHA loan this month and is thankful that she is going FHA. The first lender, a Credit Union, that she spoke with would not have had her going FHA. Sure, there were some repairs on the inspection that needed to be taken care of, but as she said, these were repairs that truly needed to be done anyway and both she and the seller have agreed on splitting the times.

Imagine, two parties working together to get things done:)

Without my sister's FHA loan, this seller, btw, would have gone into foreclosure. It's a short sale.

Jeff, Not only listing agents..buyer's agents need to understand how to write an FHA offer. Just got one asking for 3 1/2 % in FHA repair limits..on top of the $10,000 seller contribution. When questioned if he meant $300 in repairs, he assured me that the concern was the asbestos siding on the OUTSIDE of the house.

Jeff: We run into the same thing. Occasionally the listing agent does not want to submit the offer because it is FHA financing. FHA financing does not prevent closings. The new appraisal requirements, as you know, apply to conventional loans not FHA for the time being. The recent situation I ran into becomes a challenge for the buyer because now instead of him determining his loan choice the listing agent selling the short sale is determining how much down payment the buyer needs by not allowing an FHA offer based on some weird appraisal fear. The only thing constant in the real estate business is change. FHA has changed also. It is not the FHA some agents remember.

FHA has always been a favorite of mine. I love it because since 1932, FHA has helped so many American homeowners. Kate

NEAL.... . I am trying to understand your first sentence. But onto your question, "should they ignore the information if it's accurate." No, not at all. Why would I recommend that? But why would a realtor tell a seller to not allow for a specific financing anyhow, no matter what they told the seller. Let's ask this question then...."What could be an accurate statement?" to make a seller not accept any deal? The only, and I mean only thing that I could think of would be the condition of the property. But it would have to be less than average. Seriously, what else would give a listing agent the reason to tell their seller not to accept an offer? The only thing that I could think of is for the reasons that I mentioned before. And all of those reasons are either assumptions, past experiences, or a combination of misleading info. Sure, this is just my opinion, but I have been doing mortgages for over 16 years. I know if I tell someone that if they are pre-qualified, that they will get the house unless.... they lied to me about their info or something... if something comes up on title.... the appraisal comes in lower or with issues.... or they lose their job. Other than that, I am a stickler when it comes to asking the right questions upfront and I only lost one deal in 16 years that didn't fit the statements that I made above... and I am damn proud of that. Any company that I have ever worked for, if I was unsure of a deal prior to taking the application, I would run it by the underwriter. The one I lost was my 3rd year in the business and I didn't ask a specific question about their current house that they owned, that it was currently a FHA mortgage and that they were renting it out and buying another home as FHA.

You did make this statement..... "accept when I saw the buyer yelling at their LO because their rate was changed at the table...but that can happen on any loan."

That last sentence, that it can happen on any loan, is so very true. And that is in regards to anything, not just rate or because it was a FHA loan.

You did say that you never saw many FHA loans because of your area. I don't want to assume, but no matter what area someone is in, I have personally seen and have heard loan officers put their borrower into a subprime loan or a conventional loan because it was easier for the loan officer or quicker. And that even goes for many of those 100% financing loans that you saw. I actually talked borrowers into the FHA loan and not the 100% loan, if they had the 3% at the time. And then just get seller help to pay for the difference of what they had to put down. Why, it was better money management in the long run, even for a 5 year plan. Their rate would be lower....

In any case, I truly thank you for your participation in this, your feedback, and for your input. I hope you can clarify your first sentence for me, unless I am reading it wrong. thanks

Ambassador Jeff,

There's been some sort of mix up. This was delivered to Tucson International Airport this evening. :)

Mike in Tucson

JUL

ELIZABETH.... . I wouldn't call anything in the mortgage business simple. Even when something might seem to be easy, it sometimes becomes my hardest challenge. Just food for thought.

In regards to those that wear both hats, that of a realtor and a loan officer. I will agree 110% and I know about 20 other loan officers just on AR, all the I respect, would say the same thing. And some of the horror stories that I have heard, came from those clients that had someone that was both their realtor and loan officer. I wrote two different comparison blogs last year, comparing both FHA loans and conventional loans. I received about 5 very negative comments, people telling me that my rate comparisons were WAY OFF... that I was wrong, misleading, expensive, etc, etc. What was funny was that I shared these comments and my blog with a group of 15 other loan officers across the U.S. Each one laughed and some said that it was sad, that these individuals apparently don't know how to read a rate sheet, that my pricing and comparisons were right on the money. I replied to each and everyone, questioning them and asking them to show me, yes, show me their pricing and how they came up with these rates. And that they had to be missing the large penalty for low credit scores on the conventional loans. Only one wrote back to me in an e-mail, telling me that he was wrong in his comment. But this was the same guy that argued with me in 3 comments, and even telling me that he found another loan officer to validate his comments and to justify the rate. Which led me to another blog that I wrote, two wrongs don't make a right. It's really sad and I truly believe that one person can't wear a realtor hat and a loan officer hat at the same time. I know I know my shit when it comes to lending... and I know I could do a good job as a realtor... but it wouldn't be as good of a job as I can as a loan officer. I know I could do well, but it wouldn't be good enough for my clients, giving them not only my best, but making sure they got the best. Okay, maybe 1 in a 1,000 could handle this... but I would love to test them on their jobs... and yes, I responded to Lana, but she never came back to debate more or to answer my questions.

ERICA.... . wow, that is really said and scary. What ever happened to the code of ethics per se? Or doing the best for your client and not what's easiest for you, the realtor. These are the kind of realtors that we need to report. I know some realtors would disagree with me... but I want to hear their side.. I am waiting for Lenn Harley to write about this. It should be interesting.

SHELDON.... . that's good to hear. In all honesty, it shouldn't matter what type of loan it is... but that it goes to settlement and that you did the best job for your sellers, to get them the best price. And I would love to be part of that 50%... ;o)

SANDY.... . that was my main point, to get other people's attentions. I think this is very serious and it has hurt some buyers when they found their dream home. But they decided to sell it to someone else that was not an FHA offer, and even in some cases, got less money. It just makes no sense... and I hear some realtors bash VA loans, because it's 100% financing. Who gives these realtors that right, to make that kind of decision, when they have no idea or clue about the buyers. Yes, some loan officers and or lenders botch settlements or loans. But that can happen with any loan. Hell, I have closed 2 loans this year that were approved as a conventional loan, yet both didn't close because the other lenders couldn't or didn't know how to.... yes, it happens even on conventional loans. thanks

STEVE.... . I don't know of one realtor personally, but I have heard from several agents in the past, and just recently in my previous blog, that they will say this to their sellers. It's sad and yes, they should be fired.

STEVE again... . you should know read some of the comments after yours too. ;o) But yes, FHA loans don't take any longer... and if they did, even in previous years, it was usually due to those loan offices and or lenders that didn't know much about FHA loans. I took a loan from a lender that took a loan from the first lender... this was about 3 weeks ago. The first lender had the loan for 2 months and never got it approved... and PS.. the loan officer ordered a conventional appraisal on a FHA loan. Okay, people make mistakes... but from what I heard, this loan officer just had no clue. After I got the loan, I rushed it and stayed on top of it and still got it closed in 9 business days. But yes, here is a great example that FHA loans take longer, just because an idiot loan officer or lender took their time or botched something on their end.

WILLIAM aka BILL.... . they got me... I was told that I wrote that title on purpose to get their attention. Boy, they got me on that one. But wait, I got them too, because yes, that was my main intention. I felt that this was an extremely important issue that needed some exposure.

Let you and I put our feelings aside on FHA loans for a moment. There is message here, within my blog, and we need people & realtors to take this seriously. To think about their actions or what they will say, before they do anything or say anything. And yes, look at Renee's chart... I would have to assume that this is happening in most areas around the country. Overall, yes, we need to slap people upside the face, if that is the only way to grab their attention. And even that doesn't work in many cases. Thanks for your support on this one, on my methods... thanks

Thanks Jeff.

AUG

HI Jeff!

You are so right! I had an FHA that closed in 23 days and a conventional that closed in about 60 days and that was after pushing them hard with 10 times the amount of phone calls. The conventional was so much more work I cannot even begin to tell you. I think the bigger difference is not how they financed but who the lender is!!!

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