Sellers !!! Ignore what your listing agent tells you about FHA loans !!!
I am with you...FHA is great! As a Realtor now, I have 30 years as a mortgage loan officer and my wife is a loan officer and FHA underwriter. We love FHA. FHA is full DOC and I say this now, for all these years if loan officers had put borrowers/buyers in FHA loans(which they have to qualify: full doc) and NOT NINA/SISA loans we would not have the foreclosures we have today. Borrowers who were placed in sub-prime loans qualified for FHA, but the mortgage broker could not qualify to sell FHA loans, so they placed them in these more risky loans. If a buyer/borrower wants an FHA loan and the mortgage broker, with the Realtors help, even remotely suggest a non-qualifying loan...fire them and RUN!
Alas, that is another debate though.
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.
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 !!!!
Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc
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