Quick question! I am newer than brand new in real estate investing. Actually, I have not even dove in yet. The reason...?
My wife and I are trying to secure our personal and permanent residence first (And I am ignorant on real estate right now.)
To the question... We put an offer in for a house and we are going FHA. The sellers declined our offer BECAUSE it was FHA. Pardon my ignorance but what are all the reasons a seller would decline a FHA offer?
Thank you for any and all responses!
The main one is property condition. FHA loans have very strict inspection requirements and they won't fund if the fixes aren't done.
That seems like a nitpicking objection if, all things being equal, it was a good offer! Sorry to hear that. Consider your positive, and the sellers negative, which are exactly the same thing. The minimum down payment is only 3.5 percent. That's a great way to get into a home with "short" cash. However, the fact that you're planning to use an FHA loan tells the seller that the purchase may be a stretch for you - and it may be not exactly a lock that you'll get approved. And if you're in a sellers market, that's not a good thing.
Another thing is that FHA inspections could be a little more difficult to pass, although with most modern homes, that too could be a sellers misconception.
Those may not be the real reasons, and they are pretty shaky ones at that, but sometimes sellers listen to "less than qualified" advice. Maybe a pre-approval, and a limit to what the seller needs to pay for FHA mandated repairs in the contract may work?
If I receive any other viable offers, I always decline FHA offers, even when the condition is rehab perfect. In my areas FHA loans are the least likely to close. When they do close, they are slowest and the inspections the most nit-picky. Also, I typically receive cash over appraisal amount from other buyers. I'm in an active market that is still a seller's market for most things under $250K. If our market changes and I had no non-FHA offers, obviously I would work with those. Until then I take the highest, best offers from buyers with easier loans to close.
If you're going FHA you need an agent and mortgage broker that really go to bat for you. And that will steer you to properties where your loan will close.
Layn, I too reject offers on my property when the financing involves FHA, VA, USDA, etc, because more often than not, underwriting on government insured loans are much pickier than conventional loans. And one of my pet peeves is the ridiculous and unnecessary documents the lender tosses into the mix, of which I refuse to sign as a seller.
Have you been fully pre-approved? if you have and the listing agent knows this, he or she needs to put down the bottle.
that really irritates me when sellers (usually at the behest of the listing agent) declines an offer due to the type of loan the buyer is using.
FHA is not for lesser-quality borrowers. Considering they are assumable...maybe someone wants to get an FHA loan with the idea that if rates shoot through the roof over the next decade, they'll be able to get a sweet deal when they sell. imagine, it's quite the nice feature to say to a future buyer, "you can have this house/loan at 4.25%. or you can buy something else for 8%. what'll it be?...bud."
Oooooh ok, well I was unaware it worked that way. Thank you all for your replies! The condition of the property was fairly impressive. There were minor discrepancies that I noted but I am not even close to an expert on any type of rehab. I did feel as if it was nitpicking. They were asking $250k flat. And I am not kidding when I tell you this but we offered the $250k plus closing. It was on the market for 2 days. The reason we went straight to asking price is because the house was 2,200 sq ft on 1.3 acre with a 1200 sq ft fully built/insulated shop. In my location that is unheard of and anything close to an acre is snatched up in a few days. We still lost. The only thing I can think of regarding the low price is the comps our realtor pulled... Now that I think about it, weve tried a few houses and were declined most likely because of FHA. Fortunately, the last sellers realtor actually disclosed the reason. Might have to go ahead and go Conventional.
The sad part is we don't even have to go FHA but we just had our second daughter and we figured that 3.5% sounded pretty dadgum good. Failed on due diligence. And yes sir, we have been fully qualified with the FHA. Ill go ahead and take that 4.25% Mr Britton! ha
I absolutely appreciate each of you! Thank you kindly for all your input and schooling me!
PS There will be more to come! :)
When I put together a pre approval letter I've already done all my homework. Verifying assets, job history, credit history and customers personal info.
DU/LP approved Check
Customer fico scores Check
Me calling the listing agent to confirm this is a go and get the deal done Check
Proof of down payment Check
There's a lot of really slow, bad LO's out there that have messed up so many gov's loans it makes it harder for the guys that know what there doing to get deal. And this ultimately hurting the end customer.
I closed an FHA purchase last Friday and here are the stats:
Short sale 4.1 yrs ago
Not a US citizen and here on a work permit
FHA loan that I closed in 22 days including weekends.
I can't stress enought that you need a loan officer that will structure your deals correct the first time. I've never had a listing agent reject my offer because of the type of loan.
FHA is hard on repairs, restrict on appraisals, and cost seller more money.
So have your agent ask the listing agent why?
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