Someone recently landed on my blog by entering the phrase:
Why are so many homes not FHA approved?
It's an interesting question. I'm assuming the person doing the research on the internet is a home buyer and that they're looking at a stand-free home and not a condo…pure assumption on my point. (If it is a condo, that's another story).
I'm wondering if the person is finding that sellers are not promoting that they will accept FHA financing on their listed homes…which is a huge mistake.
FHA loan amounts in the Seattle and Bellevue area goes up to $567,500 for a single family dwelling and currently allows a down payment as low as 3.5%. FHA is also more flexible with credit and some underwriting guidelines.
FHA loans are more popular than ever with the ever tightening guidelines and risk based pricing that conventional loans have. Many of my FHA home buyers are putting down more than the minimum required investment of 3.5%.
Some might be selecting FHA for their purchase because they're converting their existing home to a rental property and FHA does not have the same reserves conventional guideline requiring 6 months of mortgage payments (PITI) for EACH property owned (or buying) if the converted home has less than 30% equity (which is often the motivation for turning the home into a rental).
Some select FHA financing because they plan on selling their home in the future and are hedging that mortgage interest rates will be higher in the future. They know that their current low rate FHA mortgage may be assumable to a future buyer in a higher rate environment.
I've had well established clients opt for an FHA mortgage because FHA treats alimony payments different than conventional financing.
FHA is not the same mortgage that it was a few years ago. At the end of 2005, appraisals became more "common sense" allowing minor conditions to exist, focusing more on the safety and soundness of the property. FHA appraisals are very similar to conventional these days.
FHA transactions do not take longer to close nor are their higher closing cost for the seller than a conforming loan
My point is, there are many reasons sellers should accept FHA financing. If a seller or real estate agent is steering away from an FHA approved buyer, they're really reducing the potential of excellent buyers for their home.
I just did a search, and approximately 3/7ths of the active listings in King County (excluding SS and REO) don’t have FHA checked off. That’s a surprising percentage.
Wow, Kary–that’s even more than I expected. Did you use a sales price parameter?
Wow, I had no idea that so many listings/sellers are not offering fha – maybe it has something to do with the % of distressed sales and the often poor property condition? Question, Rhonda .. what are the current fha guidelines on the assumption of an fha loan?