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FHA Turn Times = Conventional; Rate “Roll Downs”

Two Realtors asked us yesterday if we could close an FHA transaction in under 30 days. We of course said “yes” becuase it takes no more time to close an FHA transaction than it does to close a Conventional transaction. We are not sure why people think FHA transactions take longer. The appraisal and underwriting process is the same for both FHA and Conventional loans.

We can even close FHA loans in 21 days, if all parties – realtors, buyers and escrow – cooperate and are completely on board. This means we need everything (fees, signed disclosures, contracts, addenda, contact info, etc. immediately).

Many of our borrowers request “rate roll-downs” when rates fall. If rates do fall significantly, many lenders allow for “renegotiations”, but they charge dearly for them, and rightfully so. Lenders get frustrated for a couple of reasons: (1) when rates go UP, we and our borrowers demand that lenders honor all rate-locks, but when rates go down, we all want to “break” our rate-locks (we want the best of both worlds); and (2) lenders pay for rate locks in the form of a “hedge”; when we or borrowers break those locks, lenders have to eat the cost of those hedges.

One of our best lender’s rate roll-down policy is like this: “a rate roll-down is allowed if the borrower pays 1/2 of a point, and if the rate is reduced by 1/4 percent.” This is actually a generous policy, but it also means that rates have to fall significantly from the lock-date before such a roll-down is feasible. Email us if you would like further explanation.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646