FHA Loan Downsides

[Erica Davis]

For anyone who has utilized an FHA loan, did you find it hard to find sellers that want to sell to buyers with an FHA loan due to the FHA appraisal? Does the FHA loan make you less competitive when making offers? Thank you in advance for any insight!

[Jason Wray]

Erica,

My client's use FHA and have great success as long as we review a few things up font. FHA helps save on the downpayment and offer more flex on the back end DTI (Debt to income ratio). Sellers tend to only have a stigma if the realtor advises againt FHA from a previous bad closing or delay.

It's typically not FHA its usually the property itself that caused the issue or delay. As an example FHA does not allow 'Chipped Paint" due to lead paint laws. FHA also requires hand rails on all stairs up/down inside and out. FHA will look at appraisal and be picky on mold/mildew, exposed wiring, Soffit issues, Incomplete flooring (Concrete not finished) Missing tiles and a few other things but keep in mind its also "All things" that are required to pass an appraial/inspection.

My advice as a Banker to avoid issues is use a "Seasoned Realtor" and Banker plus walk the poperty and look for issues up front.  The other really important thing is ask the Bank for an "ELA" or Express Loan approval.  This is where the Bank underwites the entire loan prior to the appraisal.  So as long as it passes and appraisal the ELA is a loan committment or Guarnatee to close in 15 days or less.   

The address is "TBD" to be determined once you find it and it guarantees the seller and sellers agent a quick closing as long as the property is not "Subject To" or have issues requiring renovations/repairs. You can still but it and use an FHA 203K to renovate and close but it can take more than 30 day's.

In all honesty if you choose a seasoned agent between the realtor and Banker/Loan officer they can do some preventive maintenance to ensure you get your offer approved and the home little to no issues to use FHA and get it closed in 15-20 days. If you ever have any in depth questions feel free to check out my profile and send me an email or message.