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Dispelling Common Myths About Participating with FHA

By
Mortgage and Lending with Guild Mortgage Co - Oak Harbor WA

I know there are Realtors out there that remember the bad old days of FHA financing. I still remember having to have and FHA certified inspector check over the house and make the sellers sweep up the basement or clean a spot on the carpet. Anyone remember the VC sheet (that hasn't been that long ago)?

Well, that isn't the case anymore. FHA loans are nearly the same as conventional loans, except in some (many) cases better. Take a look at these common myths about FHA:

  1. Myth: Takes more time processing.
    Truth:
    • Takes no more time than a conventional loan.
    • Adds no additional or special requirements.
    • Uses TOTAL Scorecard/AUS approval allowing you to complete a loan in the amount of time it takes to get the appraisal.

  2. Myth: More paperwork is involved.
    Truth: Requires only one additional document signed by the borrower.

  3. Myth: Higher costs are inevitable.
    Truth:
    • Rates are competitive with the best in the industry.
    • Lender insurance programs eliminate shipping and reshipping costs.
    • Streamlined loan process.

  4. Myth: The borrower can't pay certain loan costs or fees.
    Truth:
    • FHA eliminated non-allowable closing cost fee schedule (ML 06-04, 06-07) .
    • The borrower, or any interested party to the loan, may pay all reasonable and customary charges.

  5. Myth: FHA is too restrictive.
    Truth:
    • FHA provides guidelines for underwriting; same as industry investors.
    • FHA allows for manual underwriting for all loan programs; some in the industry will not approve a mortgage loan without an automated approval.
    • Automated Underwriting Systems approval is not required - allows for hands-on, common sense judgments.

So, if you remember the bad old days when it took an act of God to get an FHA loan funded, welcome to the good new days. At Alpine, we have in-house FHA certified underwriters. We don't require any additional inspections and we draw our own documents and fund our own loans. What more could you ask for?

Additionally, if you are purchasing a manufactured home/land loans with less than 20% down, in nearly every case, FHA is better, easier and more cost effective. No more restrictive than a conventional loan on foundation and tiedowns, FHA loans are the preferred method of financing factory built units.

FHA is the new mortgage option. There are even ways to get through the downpayment requirements with a little help from your family, credit union or 401k. Call me so we can discuss your options and marketing strategies.

Comments(20)

Bo Hussung
Bell Title /Triserv LLC - Nashvle, TN

Fred those were good myth busters. FHa is definitely he best source for financing in the housing market and probably will be for another 2 years or so.

Good stuff

Bo

Aug 27, 2008 06:55 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Thanks Bo, I can really see FHA being a good 70-80% of our market for some time to come.

Aug 27, 2008 07:09 AM
Greg Nino
RE/MAX Compass - Houston, TX
Houston, Texas

Hi Fred,

Awesome blog. I'll be honest, a couple of these "myths" I thought were real. I've been in business for almost 5 years, and even when I started the appraiser did his so called "back door inspection." that was always fun. Thanks for sharing!

Aug 27, 2008 08:47 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

That is the great think Greg. Some of them were but no longer are. FHA is the loan from the past that is the loan of the future.

Aug 27, 2008 08:57 AM
Leslie Stewart
Oregon Licensed Broker with Berkshire Hathaway HomeServices Real Estate Professionals - Stayton, OR
Realtor, ABR, CRS, Oregon Licensed Broker

Great Info Fred.  I think we will be using more FHA loans in the future, especially with DPA's going bye-bye.  The toughest hurdle to jump is the buyer saving for a down-payment or asking a family member for help.  I rememeber the VC sheet- it always got here AFTER we had negotiated repairs from the inspection report.

Aug 27, 2008 10:14 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

You are absolutely right Leslie. The VC sheet timely was always impeccable, always wrong.

Aug 27, 2008 11:54 AM
Paul Dunn
Tucson, AZ
former orginator

Hey Fred, sometime maybe we can do an FHA Mythbusters Video together.  You game?

Cheers,
Paul Dunn

Aug 28, 2008 04:16 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Paul, can we blow something up? I watched 3 hours of Mythbusters last night (on my DVR so it was likee 2 without commercials.)

I would love to do a video with you.

Aug 28, 2008 04:23 AM
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Fred - This is a good reality check at some of the benefits of the FHA over Conventional Financing.  As I've said before though, I'm concerned at some of the stuff I'm seeing being bought.  FHA is NOT the new Non-Prime and I'm seeing it being treated and funding in that way... at times. 

Aug 28, 2008 08:57 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Jason, absolutely right, this is not the new non prime. I am disappointed that there are people trying to make it so. However, I think some of the old non prime should have been FHA. But then, there were some of the non prime that should never have been anything. Interesting times.

Aug 28, 2008 09:11 AM
Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

Fred, Great post and thanks for dispelling some of the old myths. I must say though, one extra document? I'd guess you're referring to the Addendum to the Purchase Contract, but what about the 1003 Addendum, MCAW, Notice to Buyers... you get the drift. Still an awesome/great/liberal/fantastic loan program but it definitely requires a little more paperwork, at least for the lender and borrower.

Do you guys really feel like the quality of the loans is degrading though? If anything I've seen it grow tougher with outside underwriters who are running scared because of the default rates. I do agree the quality of the loans being submitted has declined, which has much to do with the recent "FHA converts" who haven't learned the ropes yet, but from what I hear those deals are just getting denied. There are many who would love to make FHA the next subprime, I just don't see the underwriting corps letting that happen. Getting your DE (direct endorsement to underwrite FHA loans) isn't terribly difficult, but it's still very valuable and no one wants to risk it.

Gerry Suarez, Jr.

Your HUD Loan Pro!

 

 

Aug 28, 2008 11:40 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Hey Gerry,

I agree, it is more than one additional form, but that is what the FHA site says, so you have to believe the government, right? LOL

I think there is a bunch of low quality loans being sent through the system right now, like you said, by people that don't know what they are doing. That will change with experience or them going out. I have been a proponent on FHA loans even when they did require so much more. We had two inspectors in Eugene and one was a "joy" to work with.

Take care and thanks for chiming in.

Aug 28, 2008 12:34 PM
Greg Nino
RE/MAX Compass - Houston, TX
Houston, Texas

Fred,

FHA is the loan of the "future?" Interesting. Time to hit the books and completely understand the difference between 203b and k....any advice?

Aug 28, 2008 02:37 PM
Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

One of the great things about FHA is that there are no income limits or location restriction, not to mention it still allows for some credit leniency.

Excellent post.

Richard

Aug 28, 2008 02:46 PM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Greg, go back to my blogs. I explain the differences. The one you really need in a foreclosure environment is the 203k streamline. It will be a lifesaver on those bank owned properties. Not everyone has access to this product, find someone good.

Richard, you are right on that. I saw a post from someone (in the mortgage business) that said FHA loans are for low to moderate income borrowers. Not even close. Are you aware you can have more than one FHA loan at a time? Thanks for your comment.

Aug 28, 2008 03:12 PM
Greg Nino
RE/MAX Compass - Houston, TX
Houston, Texas

Thanks Fred...

Aug 30, 2008 04:08 PM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Greg, you are very welcome. Wish I could help you in Texas, I can tell we would have a ball together.

Aug 30, 2008 04:20 PM
Travis Neliton
Caliber Home Loans CHL NMLS# 15622 - Portland, OR
Travis Neliton NMLS 283894

Fred,

Great stuff as always. I am calling you tomorrow. Long story but it has been an interesting few weeks with kids birthday, vacations and other fun life stuff. And I am sure you will share when we talk but I just realized you have a cool blog background and I don't how do you do that?

Be Blessed!

Travis

Sep 01, 2008 11:25 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Travis, no problem. I will be happy to give you the right stuff!

Sep 01, 2008 04:33 PM
Anonymous
Honey
Good to see a tlaent at work. I can't match that.
Sep 15, 2011 07:49 PM
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