5 Reasons Real Estate Agents Should Love FHA
FHA gets a bad rep. I've seen FHA offers turned away because a competing offer included conventional financing. I've seen communities decline to push for FHA approval because of some kind of stigma associated with the program. I've heard Realtors opine how unhappy they are that buyers want to purchase their listing using FHA financing. "Do you think we'll have any problems because they're using FHA?" is a question I 
frequently get from listing agents who receive an FHA offer from one of my borrowers. I've even heard "FHA appraisals always come in lower in value".
That's crazy!
Does FHA have it's sticking points when it comes to an appraisal? Sure does. So do conventional loans. In reality, a conventional appraisal runs the same risk of posing problems for a listing. The only difference with FHA is the possibility of "repairs" when it comes to health/safety issues. What does this mean? If a house has peeling paint, it may need a quick, fresh coat. If a raised platform or stairway doesn't have a rail, a few nails may need to be hammered into a 2 x 4 to get it approved. That's it. No, really. That's it. (Bonus tip: when presenting a home for sale, these things should be addressed regardless of financing!)
Realtors seem to equally hate and fear the letters F H A, but in reality, they should love the program, and promote it regularly. Here's why:
Higher debt/income threshold means more income levels can qualify
Real estate is a numbers game in large part - your market has a certain number of buyers. A % of them are looking for a type of home like yours. It helps when that % is higher. With conventional loans having strict debt/income ratio limits, FHA opens the door to more qualified buyers. Yes, QUALIFIED. There are a lot of reasons someone may have a high debt to income ratio, and those reaons don't always involve high debt or low income.
Opportunity to craft a niche
FHA has programs tailored to a lot of different folks. We've seen $100 down payment loans, loans tailored for Native Americans, renovation loans, and many more. FHA offers so many different programs that MANY people know little to nothing about. What better way to show your expertise than to know the programs available - the programs your competitor doesn't know about (even though they're widely available).
No Cash Needed from Buyers
There are a ton of buyers out there these days with great credit, great income, and little to no savings (or, post-market crash, a fear of cutting into the evergrowing emergency fund/savings). FHA allows up to 6% sellers assitance toward closing costs and allows the 3.5% down payment to come completely from gift funds. Like with the debt/income benefit above, these figures mean MORE buyers can qualify for FHA loans. More buyers means more competition for listings. This is a good thing.
You Can Cut Your Days on Market
FHA offers the streamline 203(k) program, where a buyer can finance upgrades and renovations to the tune of $35,000, and these don't have to be NECESSARY upgrades or renovations. The baby-poop green shag carpet your seller refuses to get rid of? A buyer can finance new flooring. That outdated fridge/oven/dishwasher combo that's sucking most of the power from the neighborhood grid? Buyers can finance energy efficient upgrades in this area, too. In fact, almost anything you can think of that boosts the quality of a home can be financed with the 203k streamline purchase program, with the exception of structural repairs (but alas, there's the FULL 203k program for this!). A buyer using the 203k streamline program has the power to make a used home all their own with $35,000 of someone elses money.
You hear it all the time "the layout is great but....", "the yard is great but....", "the house has good bones"....well with FHA, buyers can make an outdated home just like new, and finance nearly everything that's needed. In many markets today, homes are selling in a day, or they're not selling. The ones that aren't selling are usually either overpriced or under cared for. If the latter is the problem, marketing FHA 203k streamline purchase financing and SHOWING potential buyers what could be done with the place (and quickly, with no out of pocket cost) could sell the home on it's own. Another misconception is that the streamline 203k is difficult to get done - it's EASY! You just have to have a lender and contractors that know what they're doing.
You're local? So is FHA? You know your local market? Prove it!
FHA allows for down payment assistance programs that conventional financing does not. It allows for grants, bonds, and community incentives that are off the table for conventional loans. There are a TON of HUD approved programs in nearly every local market, and in some markets, even if there are income requirements to participate in programs, the median income is so high that some very well to do buyers can participate. This means that your listing, whether on the low end of the pricing spectrum or the higher end, has the doors opened to more buyers, more looks, and a greater chance of selling quickly at top dollar.
FHA loan programs don't deserve to be treated as an afterthought to conventional loans. Thinking that they're inferior is outdated (going back to the days of the wild west of mortgage financing - 2006ish, when conventional loans really were easier to get), and it's limiting your creativity in selling homes and helping your buyers buy homes. In many cases, FHA loans are easier to fund then conventional loans or niche products (yes, an FHA buyer will get approved and closed faster than a luxury buyer in the same market), and with low rates and competitive PMI pricing, FHA should be embraced for what it is - a widely available, tremendously useful program with enough sections (really, every agent needs to acquaint them self with the 203k section for marketing purposes) to cover a wide variety of buyers. Sellers - don't turn that offer away because it's FHA. With other terms equal, that FHA offer may be the best one you've got on the table.
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