Why Choose FHA?

Before I answer the question "Why choose FHA as a Specialty", I'd like to give you a little background regarding how I came to do so. I remember my first week in the business about 7 years ago. The owner of another mortgage company came up to me and said, "Jason, if you want to remain in this business long-term, you need to know how to develop purchase business." Being new to the industry and scared of not being able to succeed, I really took those words to heart. Since that time I've always been focused on developing purchase business.

After about two and a half years in the industry, I became one of the leading government specialists for FHA loans. I spent the next two years developing myself in this niche in this area.  After researching my market, I settled on FHA, and here are the reasons why.

• The product has been in existence since 1934.
• It has the lowest rates for fixed loan in the industry compared to conventional loans.
• There are no credit scores. At this time, the government does not observe credit scoring. Although many lenders do put minimum limits on their credit scores, there are plenty of wholesale lenders out there that do traditional underwriting and don't observe credit scoring.
• Use of alternative credit is allowed. It's possible to virtually build a credit history for people that have no trade lines showing up on their credit report, which we will explore in greater detail in another section.
• 100% of the money for the purchase can come from a gift, from a family member, or from the down-payment assistance program.
• It's a purchase-based product. If you want to develop a purchase-based business, many of the first-time homebuyers out there are going to use FHA financing.
• Six percent of the closing costs can come from a seller contribution, so you can be very flexible with the way you structure these purchase transactions.
• The personal rewards that come with doing FHA loans are enormous. There's nothing more satisfying than taking a family that's renting and helping them become a homeowner. These customers often feel a great deal of gratitude to you for helping them achieve home ownership. As long as you keep your name in front of them, you're the first person they're going to contact in three to five years, when they go to buy their second home.
• Lastly, and perhaps most importantly, you should consider specializing in FHA loans because of the increased income you're going to gain. Take a $135,000 loan for example. On an FHA purchase, with the 4 on the back and the 1 in the front, you're going to earn about $3000 on a 45% commission split. On a conventional loan, you'll maybe make 1.25% and earn $750. On a non-conforming loan, you'll maybe earn 3% which will give you $1800. So FHA has a tremendous ability to boost your income. And because it's one of the largest segments out there in the purchase market, as Greg Frost notes in the introduction to his home buyer seminar booklet, it represents 40 to 50 percent of the purchase market.
• With the subprime market gone this is becoming popular again, most local small brokers do not have the ability, knowledge and the resources to lend on FHA loans and this narrows the competition down to lenders and give me a niche in a tough market place.
• With a lot of foreclosed homes on the market the average home needs over $5,000 in repairs, this is a perfect fit for a listing agent to team up with an experience mortgage banker to offer FHA 203k REHAB loan to move a home that has just been sitting on the market because the average consumer does not have $5,000 or more after downpayments and closing cost to repair any improvements these home need. Marketing a home in conjunction with financing that will allow them money at closing to repair the home set yourself and your listing apart from the other hundreds of homes just sitting on the market because it is in desperate need of repairs.

These are just some of the reasons you should consider choosing FHA loans as a niche for yourself.