FHA vs Conventional Home Buyers

It is a very competitive market for home buyers in the greater Seattle area. I’m finding that many of my clients who are using FHA for financing are not feeling the love from home sellers. It’s not unusual for home sellers, or more likely their Listing Agent, to steer away from FHA offers when a conventional offer is in hand.

In my opinion, this is largely due to an old bad reputation for FHA as being a tougher loan and/or that it would be more likely to have appraisal issues. If we are comparing a minimum down payment FHA to a minimum down convention mortgage, then this really isn’t an accurate view. If anything, with a minimum down scenario, FHA mortgages are more flexible than conventional mortgages and probably have higher odds of closing.

Appraisals for an FHA or conventional mortgage in today’s market are essentially the same.

So why would a home buyer opt for an FHA mortgage over conventional?

  • Minimum down payment conventional programs, like Fannie Mae’s HomeReady or Freddie Mac’s Home Possible, have income limits based on geographic areas (some areas do not have the income limits for HomeReady).  Depending on where the home is located, FHA may be better for certain borrowers.
  • FHA allows alimony to be treated more favorably than conventional mortgages.
  • FHA has had lower interest rates than conventional mortgage lately. This may be offset by mortgage insurance…. (click here for a mortgage rate quote – for homes located in Washington state only).
  • FHA has lower down payment options than conventional when a buyer is considering a 2-4 plex as their primary residence.
  • Conventional mortgages have a much larger range for what mortgage insurance will cost based on credit scores. Home buyers who are doing minimum down payments  with a conventional mortgage could (currently) see rates ranging anywhere from 0.44% for excellent credit (740+) to 2.25% for lower credit scores (620-639). FHA’s annual mortgage insurance premium (paid monthly) is not credit score driven and is currently 0.85% for a minimum down 30 year fixed mortgage. Of course FHA also has upfront mortgage insurance which is financed into the mortgage.
  • FHA has a shorter wait period for short sales and foreclosures than conventional mortgages.

If you’re selling a home or are a listing agent, I highly recommend that you reach out to the Loan Officers who are working with the buyers on the offers to give them a sniff. The lender may make more of a difference in how smoothly your transactions is than the actual program when you’re comparing minimum down conventional to FHA.

If you’re considering buying or refinancing a home located anywhere in the state of Washington, I’m happy to help you.

Updates to Fannie Mae Guidelines

Last week, Fannie Mae released Selling Guide Announcement SEL-2017-04 with underwriting updates, including the special pricing for when home owners refinance their home to pay off student loans. Fannie Mae is the Federal National Mortgage Association and basically provides funding for conventional “conforming” loans. [Read more…]

Appraisals waived for some refinances!

mortgageporterhomeFannie Mae will begin offering appraisal waivers on some refinance transactions. This is great news as it will help transactions that qualify have a quicker closing and help reduce the work load for appraisers which will hopefully help expedite current appraisal turn-times. This will also help home owners save money on their transaction by not having to pay an appraisal fee, which have gone up dramatically over the last few months. [Read more…]

2017 Conforming Loan Limits for Washington State

MortgageConforming loan limits are getting their first increase in ten years.

Conforming high balance areas for King, Snohomish and Pierce counties have have higher limits for 2017 as well.

San Juan County’s high balance conforming loan limit is unchanged from 2016. [Read more…]

BREAKING NEWS: Conforming Loan Limits INCREASED for 2017

MortgageConforming loan limits have been increased for 2017.  The last time conforming loan limits were raised was in 2006. Conforming loan limits for the last ten years for a single family dwelling have been limited to $417,000, unless the home was located in a county with a high balance conforming loan limit. High balance conforming loan limits for the greater Seattle area have been raised as well to $592,250 for a single family dwelling. [Read more…]

Fannie Mae’s HomeReady Mortgage

2013-03-07_0746The HomeReady Mortgage is a mortgage program created by Fannie Mae intended to help low-to-moderate income borrowers with good credit buy or refinance a home.

Here are more details about the HomeReady Mortgage:

[Read more…]

2016 Conforming Loan Limits for Washington State Mortgages

MortgageConforming loan limits for homes in King County, Snohomish County and Pierce County received a boost with the high balance conforming loan limits of $23,000 for single family dwellings.

All other counties in Washington state will have 2015 conforming loan limits.

[Read more…]

High Balance Conforming Mortgages to Reduce Down Payment Requirements

iStock-000018668640XSmallFannie Mae has announced that effective mid-December 2015, high-balance conforming mortgages will have lower down payment requirements. “high balance conforming” mortgages are loan amounts that are higher than “traditional” conforming loan limits ($417,000) and less than non-conforming mortgages and are available only in certain counties that are considered to be “higher cost”. In Washington State, currently (2015) King County, Snohomish County, Pierce County and San Juan County have “high balance conforming” loan limits. The high balance conforming loan limit for King, Snohomish and Pierce County is presently $517,500 for a single family dwelling.

[Read more…]