FHA Loans – What You Should Know

Over the past 10 years, somewhere along the line, customers approved for FHA loans got a “bad rap” in the real estate community. Borrowers were viewed as “shaky”, appraisals were labeled “over the top”, and condition lists for final approval seemed cumbersome.

The fact is, FHA financing, in many cases, is the best option for many potential home buyers. Still have a nervous seller? Let’s start with a few facts to ease their minds.

FHA loans are presently sitting .625% lower than conventional financed loans which helps increase the buyer’s home search and offer prices. Better community? That extra garage stall, or bathroom? Competitive seller’s market?

Next, FHA loans can be used with FICO scores down to 580, with as little as a 3.5% down payment.  Conventional loans stop at a 620 floor, and with some lenders having 640 or even 660 minimums.  Speaking of that 3.5% down payment requirement, it can all be gifted! It’s also worth noting that sellers can contribute to down payment and closings costs for the potential buyer of their home up to 6% of the home’s value. So, even if the customer has had some credit issues, and doesn’t have a ton of money for down payment, FHA helps a broader section of buyers achieve home ownership!

What about those appraisals? Well, a lot has changed. If your buyer is doing an FHA loan, the appraiser doing the inspection will be FHA certified. As long as the home is livable and free of health and safety concerns, you should have no noticeable distraction created by the appraiser. And for the record, conventional appraisers call out health and safety issues as well. One item to note, if the home you are listing is built before 1978, please be sure to address any peeling paint prior to listing if you would like it to be an option to an FHA buyer. This is arguably their favorite target to call out.

Lastly, interest rates are down! An FHA fixed 30-year loan at the time of this article is sitting at 3.375%, with no points paid at closing. So, not only will the present buyer have a great rate locked in for as long as they live in the home, but FHA loans are assumable by the next buyer. Picture yourself as a selling agent, marketing a home with a 3.375% rate, when rates are in the 5’s, 6’s, or worse!

So, FHA loans are not nearly as scary as they have been made out to be. Work with a lender that is FHA certified, and knows what they are doing and you will be in good hands!

 

 

 

 

Results Home Mortgage

President of Results Mortgage As a nearly 20-year mortgage industry veteran and also a Wells Fargo President Club designation recipient, Lance is able to speak from experience. Feel free to reach out directly with any questions on mortgages and lending in Minnesota or Western Wisconsin area. Contact him now! Continue Reading

President of Results Mortgage As a nearly 20-year mortgage industry veteran and also a Wells Fargo President Club designation recipient, Lance is able to speak from experience. Feel free to reach out directly with any questions on mortgages and lending in Minnesota or Western Wisconsin area. Contact him now! Continue Reading

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