June 30th, 2009 2:18 PM by Lehel Szucs
FHA vs. Conventional There is still a perception amongst a number or Real Estate Professionals that FHA loans take longer, they are harder to qualify for and are more restrictive on property condition. This could not be further from the truth. Last year we know that the Federal Government stepped-in and basically took control over the decisions made at both Fannie Mae and Freddie Mac, to help ensure the stability for both entities. The Government is in control of lending, and with Conventional Underwriting Guidelines tightening-up as the market “clean up” continues, FHA is most certainly the way to go; especially on your purchase transactions. Three reasons why FHA is the best choice: i. FHA only requires 3.5% down, which can all be a gift - 620 minimum credit score with current 30 year fixed rates under 5.5%. FHA insures the loan but there is no separate PMI Underwriting required, which we all know that the MI companies have tremendous restrictions especially in this current market. FHA allows for flexible qualifying ratios and uses a “common sense” approach to underwriting. All-in-all, FHA is the most flexible loan option for your clients on the market today. ii. Property Standards – FHA has relaxed the health and safety requirements to make properties eligible for FHA financing. The FHA appraisers basically follow the same inspection checklist they would for a conventional appraisal. Even better, FHA no longer requires a termite report unless the appraiser notes on the report “evidence of active infestation” and recommends a termite inspection be done. Most selling agents and borrowers will still request a termite inspection anyway especially here in California. iii. No more seller non-allowables -The seller is no longer required to pay designated closing costs for the borrower but in this market it is very common. The borrower’s of course like to use “other people’s money” if they can. But the seller now has more control when accepting an offer in order to make a deal work for them. This is just a few of the items that make FHA insured loans a great option today! HUD has stepped up and with FHA Insuring has made home loans more affordable and easier to qualify for many borrowers throughout the Unite States. The FHA volume has increased by more than 200% since 2007 with California being the leading State for FHA originations.
Please call me anytime if you have any questions or need a to be qualified for a possible FHA loan. Have a great day!