In Defense of FHA! Misconceptions Persist!
Agent Beats Client With A Bat!
Yes, it was terrible to see! We once had an agent mercilessly beat her client!
Here is what she did: she made her client go with 5% down conventional financing instead of FHA financing!
It was horrible. Her client had credit issues, a low credit score, and very little cash.
But the agent mistakenly believed that nobody would accept an offer with FHA financing, so she put her client through hell.
Why We Love FHA Financing!
FHA RATES ARE LOWER: FHA loans have lower rates than conforming (Fannie/Freddie) loans. This is especially the case for borrowers with low credit scores (under 680).
14 DAY CLOSING TIMES: It is a huge myth that FHA loans are harder to close. We can close them in 14 calendar days all day long.
DO NOT NEED CLEAR TERMITE/PEST INSPECTION: There is another pervasive myth that FHA loans require clear pest inspections. They don’t, and can be done “as is” (with no inspections) just like any other type of financing.
LOW DOWN PAYMENT: FHA loans only require 3.5% down, and all of that can be a gift from a relative.
LENDER CREDITS: Because FHA rates are so low, lenders are able to increase the interest rate more easily in order to garner more “rebate/commission” that they can then share with borrowers as a credit for closing costs. This of course helps cash-starved borrowers tremendously.
FLEXIBLE CREDIT STANDARDS: FHA is much more flexible when it comes to credit and credit scores, and they do not punish low-credit-score borrowers with higher rates like Fannie Mae and Freddie Mac do.
DRAWBACK/MORTGAGE INSURANCE (MI): The only big drawbacks to FHA are the Up Front Mortgage Insurance Premium of 1.75% of the loan amount (which can be added to the loan), and the annual mortgage insurance premium of 0.85% (in most cases). But again, for borrowers with credit issues and low down payments, FHA MI and rates are often lower overall than what borrowers could get with conventional financing.
Have Us Call Listing Agents!
We have discovered that the best way to overcome FHA apprehension is to have us call listing agents whenever an offer is made with FHA financing.
We can always assuage listing agents when we explain that our borrower is 100% pre-approved; that we can close in 14 calendar days; and that are many reasons to prefer FHA financing.
So, no, the agent did not actually beat her client with a bat, but she most definitely did metaphorically.
Her client had to go through hell explaining away credit issues, dredging up 5% down, and then finding sufficient funds for closing costs (when we could have given her a huge credit with FHA financing).
Worst of all, her client ended up with a higher payment – all because the agent did not understand how advantageous FHA financing can be.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167