FHA, is it a good way to borrow?

If you are not offering FHA you are disqualifing up to 80% of prospective borrowers . Lower credit scores that are kicked out conforming loan programs are many times eligible for FHA also for higher loan to value purchases or refi's the FHA isoften more affordable for the client. THE most important thing to remember about FHA is that is an insurance for the banks and what one bank will approve another bank may decline.I have been doing mortgages since 1984 and FHA is much easier to deal with today then back 20 years ago especially regarding appraisals.

We lost a sale on our house this summer to FHA buyers because the appraiser used by the lender completely low-balled the appraisal. He did not even visit the house himself, and used as comps houses that were in much worse condition and much smaller (3 beds instead of 4, 1.5 baths instead of 3, a 40 year old kitchen instead of a new one, etc...), and which all had current assessments 50K lower. Even the pictures they used in the formal appraisal made our house look like a dump. The number came in stunningly off from the house's true market value, and there was no way we could do the deal at the number they proposed, and our buyers could not get a mortgage commitment. The lender refused to reconsider the appraisal. We have a fabulous house that received a ton of interest, and lost precious market time during the height of the summer selling season. I spoke to a number of realtors, lawyers, and lenders who all told me that the appraisal process for FHA is what makes them undesireable loans from the seller's perspective. We all lost out in the end. I will not be in a hurry to sell to an FHA buyer again. Give me someone who can get a conventional loan, please!

We bought with the FHA 203k rehab loan and it was an absolute nightmare. The FHA process was slow and painful, the appraiser they use also lowballed us and nearly derailed the whole thing, the selling bank (foreclosure) didn't like it one bit when we had to ask for a long extension because our loan didn't fund in time, the fees were exorbitant, and our contractor is fed up with all the extra paperwork. The only good thing about this is that we got in with 3% down and got the rehab financing, but I'm convinced there is an easier way. FHA loans should be considered the option of last resort--we would not do it again if we had the chance.

I have been doing loans since 1994 and FHAs since 1998, and I can tell you, the appraisal valuation process is exactly the same between conventional and FHA. While FHA may require a couple of extra steps, all lenders, conforming and FHA are scrutinizing the appraisals with desk and even field reviews. I truly doubt you lost your sale due to a "low-ball appraisal" because if it truly was too low your realtor should have been able to offer recent comparable sales to change the appraiser's mind. I have never met an appraiser who refused to consider higher values IF they could be supported with evidence. More likely s/he could not justify your price compared to what actually sold in your area in the last six months.

I don't think you can necessarily blame FHA for a bad appraiser - the loan originator hires the appraisers, not FHA. I am a realtor and I have had several homes close this year with FHA loans and haven't had any problems so far, except for having to sit through really long closings with all of the paperwork!

And also I am in the process of refinancing my own home with an FHA loan. Since I'm self-employed, financing is extremely difficult in this market. And my appraisal came in much higher than was expected, so I think every situation is different.

I recently bought a home using an FHA loan, and I must say it is a huge help in terms of downpayment.The abiltiy to maintain some funds for renovations rather than using all the money for a conventional down payment is also a huge plus as well. There was a lot more paperwork needed, and it seemed to be very strict on what they wanted for information from us. The lenders appraiser can deffinatley be the biggest obstacle in this type of loan. I would reccommend potential buyers appraise the home seperately before getting too far along in the process of purchasing a home, and risking losing out all together.

My wife and I purchased our first home this past spring using an FHA loan and had no problems with the process. I believe our situation was smooth for two important reasons: 1. we had already begun gathering up our financial information for the loan application so it was ready to go once an offer was accepted and 2. we had a great mortgage broker who explained the process and gave us deadlines further in advance to make sure everything was ready to go a week before closing.
FHA does have some extra hurdles, one of ours was we needed two appraisals because the house was being sold again within 180 days of the previous sale (we bought from a flipper). And we did need the pest inspection and documentation that structural repairs listed in the P&S were completed. Really the only thing that delayed our closing by two days was the ineffective and borderline negligent seller's agent dropping the ball on not getting necessary paperwork back to the mortgage broker on time that almost tanked the whole deal.
FHA is a great option for people who are ready to buy but can't necessarily afford the 20% downpayment (which is almost impossible these days for first timers). I would just make sure you have a great agent and mortgage broker working with you, don't pick the first name you see in the phone book, communication is key to make the process go smoothly. And understand that you will need more financial documentation these days so have it ready to go!!

I purchased a prop using FHA finanicing. While the down payment is low, the closing cost was extremely high. I got a $9k credit from the lender and I still had to pay an additional $6K in closing.

I USED FHA TO PURCHASE MY HOME IN 2001 AND CLOSED IN 30 DAYS. NO PROBLEMS AT ALL. I DO BELIEVE THE INSPECTION WAS A TOUCH MORE INVOLVED AND COST JUST A LITTLE BIT MORE. IT IS ABSOLUTELY A GREAT WAY TO GET INTO A HOME FOR 3% DOWN AND .50% PMI. FOR YOUR FIRST IT IS THE WAY TO GO. THEY ARE FORGIVING ON CREDIT SCORES WHICH IS REALLY IMPORTANT NOW BECAUSE IF YOUR MID SCOR IS LESS THAN 720 FOR CONVENTIONAL YOUR NOT GOING TO GET THE BEST RATE. ALSO ABOUT 1% OF THE 3% DOWN CAN GO TOWARD YOUR CLOSING COSTS...!

GOOD LUCK.

I had two options when looking to buy a house in 2005. Two mortgages, one an interest only and one a sketchy ARM that I didn't really get, and an FHA loan. I chose FHA and I'm so glad I did. I think I would have ended up in a mess with the other arrangement.
My real estate agent hesitated to even mention FHA to me, because he thought I would be insulted. But I was looking to buy in a place where the median age and income is twice what mine is. So, I was considered "low income" for that area and eligible for FHA.
I did not find FHA to be slow. We closed on our house in 30 days, just like the seller asked. The one thing I will say is that they are strict about the quality of the house, so you can't buy a total fixer-upper with FHA. Thye want to make sure the home is move in ready. Our inspector found termite damage that had been repaired by the previous owner. We had to get a pest control person to come out and verify there were no longer any termites, and a sworn statement from the inspector that the damage was indeed repaired to his satisfaction. It cost us a bit extra, but was worth it. Without FHA loans, hard working people like me who can only put 5% down but have the means to pay a mortgage and not default could never buy a house in MA.

I am an FHA approved appraiser. The FHA has required Protocal as FNMA and FHLMC have Guidelines. The FHA is looking for nothing more than a market supported and objective estimated Market Value, which is what the appraiser is required to in accordance with USPAP. It sounds to me as though the problems that are being described are due to incompetent appraisers and sloppy appraisals.

Anita,

Don't knock the FHA loan because regular mortgage lenders are not making loans in areas that have seen even marginal price declines unless buyers have 20% to use as a down payment. The program is designed to help first time homebuyers break into home ownership with a lower downpayment. The fact of the matter is that with homes being difficult to sell, the majority of people in the market for homes are first time buyers. For those folks starting out, the climate is very different from 20-30 years ago.......remove them from the market and things get worse because otherwise you're making deals contingent on the buyer selling their current house of which they are having the same difficulties you have had in selling. It sounds as though the parties involved were not familiar with the FHA program and that can cause problems because during the recent real estate boom, FHA loans were almost never used because you could get a $400k loan easily with no income verification. FHA loans are going to become more widely used in the future because of the current financial mess that the housing and credit markets are in. I hope you sold your house because it is only going to get more difficult in the coming months.

Very few people are looking at conventional loans these days. It almost isn't worth it at this point if you have under 20%. The PMI costs for an FHA loan are about half the cost of a conventional loan. Anita, sorry to hear about the sale falling though. Did you hire another appraiser to compare the FHA appraiser.

We are closing (as buyers) on a property today using an FHA jumbo loan in California. We were able to close in 30 days and the FHA appraisal came in only $5K less than the seller's appraisal (non FHA). We are proof that FHA works - just make sure you work with a lender that is experienced with FHA loan requirements. Having perfect credit, lots of cash, and no debt also helps ;-)

I obtained an FHA loan for the purchase of my first home this past spring and was grateful for the opportunity, as I didn't have the capital for the down payment on a conventional loan. My salary is adequate for my mortgage payment but I just had not saved prudently enough and the opportunity to buy a home came to me more quickly than I had anticipated, so I made it work.

The separate pest inspection was the biggest hurdle, believe it or not. The problem I had with it is while the lender demanded "proof that there was no structural damage" - they could not articulate precisely what form that proof should take. Apparently, no one wants to sign their name to this 'absolute proof' and it becomes a murky situation. Ultimately, my loan application was accepted.

I understand Anita's frustration as a seller (the selling agent I dealt with was openly hesitant when we told them I would be acquiring an FHA loan) but this option is a good option for those buyers that can support the mortgage payments.

The solution isn't to dismiss out of hand buyers hoping to use an FHA loan for their purchase. The solution is to pressure the FHA to shore up their practices to make these transactions more effecient, thus more successful. Ultimately, that is what will increase the potential of buyers - which should lead to quicker sales, not fewer or lost sales.

My husband and I are closing on our first home next week with an FHA, and we couldn't be happier. We did find that the lender was very specific with what was asked of us, we needed to have several documents to prove our income etc, but in the end we feel it's been worth it. We didn't run into any issues whatsoever with the inspection and appraisal, I'm sure it helped that the house is in pristene move-in condition. Our interest rate has dropped well below where it would have been with a conventional, and has dropped twice actually in the past 3 weeks.

I recently refinanced out of an FHA loan on a house I purchased/renovated. I got the section 203k loan and was told that if I refinanced out of the 203k when the house was done that I'd get a percentage of my MIP (The FHA version of PMI) that I paid upfront and every month back. I literally paid over $5,000 in upfront MIP costs and recently found out that the mortgage broker lied. All told I spent an extra $6000+ that I will never see again to close on an FHA loan. You're better off saving money until you have a bigger downpayment.

My wife and I purchased our first home (single family) in Charlestown, MA using an FHA loan. While the paper-work and financial status scrutiny was more than most loans, it was worth it. We got a 30yr fixed at 5.7% (rates from March). Unlike the "liar loans" , these require actual proof of income.

We obtained an FHA loan to purchase our first home late last year -- the process from putting in an offer to closing took a total of 24 days. Like Scott above, we had our financial information gathered before they accepted the offer and worked with an excellent mortgage broker who took the time to explain everything and made sure the process kept moving along. The appraisal went really smoothly, coming in ~$9K above the asking price. I would highly recommend first-time homebuyers explore this option.

The lender and appraiser refused to consider the numerous comps provided to them by both our realtor and the buyers' realtor, and refused to consider reviewing the appraisal for accuracy. As I said the appraiser never even came in the home, and was not comparing apples to apples. There were plenty of other comps. The buyers needed a significant amount of money back from us to close, and I do believe that the lender accepted the appraisal as a way to get out from loaning the money to the buyers.

I am not saying that FHA is a bad thing -- but my house was very saleable, and was getting a lot of activity, and unfortunately we accepted the wrong offer. I will be much pickier the next time around.

We are thankful for our FHA mortgage. We live on the west coast and were able to have a home built in 1985. Under an FHA/HUD program. How else was someone in that time period (12.5 -16% interest rate) able to get into a home with an annual income of $11,000? We have since refinanced, twice with FHA. The process at
times had it's moments, ie: slower processing and having to pay PMI upfront on each new FHA refi. even though we had a 60- 75% equity position in the property. Our foreclosure index is one tenth of one percent and our credit rating is in the higher 700's. It just didn't make sense to refi with a conventional loan due to the
cost involved with closing on a new loan that we didn't have to pay with the FHA
loan as it was streamlined. The interest rate was also I beleive 1/2 to 3/4% lower.

I am a licensed mortgage broker in Pennsylvania. I do not have a mini-Eagle and therefore I am not allowed to originate FHA mortgages. To get the mini-Eagle there are high capital requirements,
minimum 3 full time employees and CPA audits plus a $ 1,000 application fee to HUD. Why? Consider VA originations. VA requires a $ 100 fee and a sponsoring Mortgage Banker. VA assigns you a registration number and you process the loan a conventional loan. The loan is submitted to your Lender for approval and closing. As a Broker I consider that FHA requirements unfairly shut out access to FHA loans which are the only game in town at this moment . With the mandatory national licensing data banks originator performance will be tracked and any concern for fraud will be reduced if not completely eliminated.
There are rumors that Mortgage Brokers may be allowed to originate FHA loans soon. At present I feel as a "second class mortgage broker". I hope we the Brokers in high numbers unite to demand equal access to FHA.