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FHA (Loans) CRUSHING Conventional Financing!

For comperable loans, within FHA loan limits, the FHA advantage in regards to rates, quidelines, and attitudes is overwhelming.

Check this out!

Rates;

Since fannie/freddie, and essentially all conforming lenders, have gone to the tiered pricing the FHA rates for scores between 620 and 679 look better and better. No hits with FHA! The descrepency with loans beween 620 and 639 is substantial.

Also, for low downpayment loans Magic (PMI) is increasing their premium from approximently .9 to 1.7. If you are applying for a low/no downpayment loan they've got you coming and going. No change at FHA!

Also despite what you hear from the national media there are some very favorable fixed rate options available for borrowers with scores below 620. Actually quite a bit below 620, thanks to manuel FHA underwriting.

By the way the FHA rates were/are basically lower to begin with.

Let's hear it for the FHA!!!

Guidelines;

I'm in what's classified as a declining market and appraisals are tough. The conventional lenders have cut LTV's by 5% accross the board. They also look at the appraisals with a fine tooth comb and require at times documentation which is stifling. I just closed an FHA, with maximum financing. The appraiser addressed all market conditions up front. There were NO appraisal conditions from the underwriter. While the general underwriting conditions at FHA have tightened, remember they also need to be investor quality (saleable), the conventional loan conditions in many cases have become inconsistent and unpredictable. I'd call FHA workable.

Attitude

Yes, ATTITUDE!

Think about it. If you're a borrower with a 625 score you went from being kinda average to high risk, with conventional lenders. Over at the good olde FHA you're viewed as a pretty good looking borrower. At 655 a conventional borrower is still seen as risky, while FHA has a big smile for this client.

AND;

At 675 a conventional lender is still charging a premium, while the FHA is doing cartwheels. We LOVE this client at FHA. This is a premium client, grade A or better.

BIg question?

As a borrower how would you like to be looked at?

That's not a tough question.

So, let's hear it for the FHA for offering great rates, with reasonable conditions, and throwing in some respect for free.

Posted by Jay Beckingham on 02/08/2008 10:24 AM

Comments (24)

florida, southwest florida, realtors, mortgages, cape coral, port charlotte, punta gorda, tampa, estero, bonita springs, naples

Post is included in group: All About Mortgages/Mortgage Networking

24 Comments on FHA (Loans) CRUSHING Conventional Financing!

FEB

2008

.9 to 1.7, ouch!! What is the FHA MIP rate? Do you know? How can I look this up? I am going to go totally FHA over the next 30 days. THANKS!

Randy,

FHA charges 1.5% upfront, which is financed.

then .5 per month.

get ahead of the curve. you may see some great things by FHA to help, look for higher limits in high costs areas.

Jay

Now this will get people's attention! (good closing line jay)

FEB

2008

Joan,

we've got some strong programs to work with, just not as many as previously, and the ridiculous is gone.

we always need to remember to treat our clients with respect, because they're our clients and deserve it.

thanks

jay

Good Post Jay,

Excellent post, where we had seen so many programs before that were inline to basically put FHA demand close to 0 because of the alternatives out there those programs are gone and definitely seeing a resurgence in the FHA market. Just a quick question have you heard about any plans to change the FHA min down from 3 % to 1.5% I heard that could happen? or being kicked around anyway great post!

Darren,

thanks and yes i have heard that being discussed.

if you need some help give me a call and i'll show you how to use the DAP'S (downpayment assistance programs) to create a no downpayment or near no downpayment loan for your buyers.

yes, the DAP's are still alive and well.

jay

239-745-5646

FEB

2008

Nice Post.

If we used more FHA vs. subprime over the last three years we would not be in the mess we are today. Cogratulations with helping your clients. It is the same I do here in Indiana

Happy Selling!

Tony Grego - Indiana Mortgage Broker

Tony,

i agree that many subprime clients could have gotten FHA loans and would be sitting pretty with low fixed rate mortgages. Our industry failed them.

new FHA changes will only enhance the opportunity.

for loans with less than a 20% downpayment you've got to take a hard look at FHA and price it out.

Jay

FHA is great. I place the majority of my clients with FHA.

Don,

and it's getting better every day.

jay

One thing I've learned over time with FHA, which could be critical for your clients, is that (from my experience) it takes FHA about 7months to a year to foreclose on someone. They're not super fast on foreclosing and evicting. On the other hand, conventional often has people out of the home in 4 to 5 months or less.

Very well put. Good Post.

It should be said the FHA does not actually lend money, they only insure it. FHA loans were the first 30 year fixed mortgages, created in the wake of the Great Depression at a time where most mortgages had very high rates and 5 year balloons.

Risk based pricing may be implemented soon, and there could be higher PMI than the current reduced factor.

Stronger BC companies like Equifirst are now getting in to the FHA market and it scares me. It is obvious they are banking on the new FHA legislation allowing an expanded set of brokers to approve and underwrite the loans with less strict licensing requirements. Thank god most FHA loans are at least fixed.

If the legislation passes the Senate as it did the House there will companies underwriting "niche" FHA loans. Loans like refer/eligible's with <575 Fico, and making exceptions 1 year out they should not be making. It will increase defaults in FHA loans and the program will be further reformed.

Hopefully the Senate will strike the relaxed requirements for licensing from the bill and the program will remain the status quo. The brokers that are in the mortgage market for the wrong reasons will keep dropping out, and us good LO's will have an increased market share. Our reward for DOING THE RIGHT THING.

FHA may change to a risk based model with the implementation of the FHA Modernization Act. That would cause tiered mortgage insurance pricing. Do you think this would affect the attractiveness of FHA?

FEB

2008

Randy,

FHA is more apt to work with a troubled borrower than any other loan available in my opinion. however, i don't really take that into consideration when originating loans, rather does the program best suit the clients needs.

Tom,

thanks

Joe,

i did point out that the loans needed to be investor quality (saleable) that would show that the FHA is not funding the loan.

risk based pricing for FHA would change the costs for the lower scores. currently many investors have pricing adjustments for lower scores, usually below 580, and/or for manuel underwritinig.

Eddie,

i don't think it will for the groups i referenced because they would be FHA's better/best clients. the effect could/should be on lower scores. i'm not sure that investors will purcase these lower scored loans even with higher insurance coverage.

Jay

FEB

2008

I like the fact that FHA will work with someone with a parttime job - there's a ton a flexability! MY genuine hope is that with all of these folks with REALLY negative credit and foreclosures - I'm hoping FHA will be the first to give them a helping hand!