And what I mean by that is that FHA is not some kind of a spectacular loan program. It is very useful in certain situations, but most often the best way to go is conventional if you qualify. Conventional offers the best rates and terms avaiable which is why it is reserved for those with good credit and income qualifications.
I get people coming to me all the time who have been sold by someone who later denied them on an FHA program. Sometimes the person coming to me is qualified for conventional financing, and I ask them "why FHA". I usually get the same response. Something along the lines of "I am a first time home buyer" or some other irrelavent speech about why FHA is so great.
Often times the file is denied for one reason or another, most often because the person in need of financing was not properly qualified. Most deals that can go through FHA can also go through conventional with better terms. Traditionally FHA is utilized for the credit challenged or those with unestablished credit. No score programs are great for people who have zero establish credit and no derogatory tradelines. FHA really filled in some of the gaps when the subprime crisis hit.
Still, most deals that would've gone through a subprime category back when loans were easy and loan officers were lazy could've also gone through Fannie Mae. Prior to the PMI companies stepping in and laying out some heavy restrictions, I could get people with low 500 scores approved and closed through Fannie Mae.
Now that PMI companies are refusing to insure loans for low credit score borrowers with high LTV's (I don't blame them) FHA offers some attractive alternatives. As of today MGIC is refusing to insure any loan that is over 95% LTV if the borrowers credit score is under 680...
Still, the products to get the deal done are out there, you just need to find them and sometimes you need to be more creative.
Comments (6)Subscribe to CommentsComment