Mortgage Matters In Minutes #4 – Why Dont Sellers Like FHA Loans?

Brent talks about FHA loans.

Hey guys we’re back with mortgage matters in minutes for another week to talk about some home loans and processes and actually this week mainly we’re going to speak about why do sellers not like fha loans so as our title calls it why don’t sellers like fha loans and this has been a huge ongoing discussion for some many years now probably the last two or three

Years um i can share a mortgage specialist here i would say 99 of the loans that we do are conventional loans uh and that’s really um frustrating for a lot of first-time home buyers but also a lot of buyers that might have credit issues um or just have a different situation of why they might want to take fha financing which many times allows for lower down

Payments so again most people think the f h in fha stands for first time home buyer but it does not it stands for federal federal housing administration so uh why don’t sellers like fha loans and there’s three main topics we’re going to talk about today and it’s been a big ongoing discussion as we wrote a blog some many years ago explaining this and it’s really

Taken off because i know as buyers are out looking for homes and they can only qualify for an fha loan for some reason they’re putting in offers and their offers might not be getting taken seriously compared to something that has cash or a conventional loan so what’s the the reason what’s the issues that sellers or maybe realtors advising their sellers that

They don’t want to take on an fha offer the first uh number one reason is that the appraised value whatever the appraisal comes in is the seller must agree to that value so if they agreed to sell a home for 200 000 and the appraised value comes in at 190 000 then the seller must go down to 190 000 and they can’t force the buyer to make up the difference or do

Anything else and that appraisal because it’s a government loan stays attached to that house for 120 days so if somebody else wants to come along and still purchase that property they must sell to them for 190 000 so that’s you know issue number one that we run into in regards to sellers not liking fha loans number two is many times the borrower or the buyer

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Of the property because they’re taking fha loan fha is much more forgiving with past credit issues they’ll allow for lower credit scores they’ll allow for higher debt to income ratios and these things might not mean anything to you but what it does mean is that it does have a little bit riskier of a buyer that something could happen along the process to not make

Them qualify so because of that risk again that’s another risk the seller is taking on on behalf of the transaction and the biggest item usually in what we’ve seen the last couple years of why sellers don’t like fha is the property condition it’s not that every property out there is in bad shape that’s not the point here but fha back in 1934 created minimum

Property standards and what they did and what allowed the housing market to be is what we know it is today we have running water and properties we have you know windows that work you know it also brought in outside um restrooms inside so these are some of the things that we go way back in time to the 30s 40s 50s these are the minimum standards fha created but

The main items that fha lenders look for right now are about five things so the biggest item that appraiser is going to look for when they appraise the house is they’re going to see is there any peeling paint anywhere on the property and why do they care about peeling paint because in the past paint had lead-based paint in it and lead-based lead inside of paint

Can cause people to come really sick and possibly be injured and die so if they notice any paint flaking off the property appealing they’re going to require the seller to fix that number two is handrails if we see any steps usually greater than three i’ve seen two i’ve seen five we don’t really run in this very often but they want handrails next to the steps to

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Give people that can’t walk with the greatest of assistance you know a little bit of a handhold down the stairs to make it safe for them number three is trip hazards they also want to look on the concrete in the driveway for any trip hazards or in the sidewalks that someone can fall become injured possibly die you know obviously what we’re talking about here

Today is fha minimum standards is looking for safety and soundness of people using that property and to make sure no one becomes injured or hospitalized or at the worst possibly die on a property the last two that fha appraisers generally look for that we see as a common point is windows that are maybe painted shut are sealed shut by some kind of a lacquer and

We see that you know generally in some very old properties that people just aren’t sure how to paint the windows they paint them while they’re still on the property so the windows and entire home must open in case of a fire so people can vacate and the last thing is we need to look for running water and a heat source in the property again we generally run into

These we generally do not run into these situations but it does happen so these are the kind of big items that do come up can the fha appraiser look for anything else of course and this is where the seller gets to be a little bit worried is that they think uh and there’s still rumors that fha loans hire their own home inspector which is not true uh it’s an

Appraiser that looking at the property on the eyes of the underwriter and the lender to make sure there’s nothing bad going on some of the things i’ve seen uh through the years is you know holes in the side of the home you know second story um balconies that don’t have a deck on the property as well so there’s many different items and many different reasons

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That the appraiser can ask for it and again i know many people get very frustrated with this but the appraiser is not looking to harm any deal what we call kill a deal or kill a loan they’re just wanting to make sure that if anybody uses the property it’s going to be safe and sound for everybody that’s going to be on that property as much as they can control

It before closing as if something does happen on the property obviously in the litigation world that we’re in uh people very much would like to sue and uh then if lenders know about these issues they’re going to be held liable or possibly on that lawsuit as well too so we actually have a great blog on our website all these mortgage matters and minutes each week

Are a topic from the blogs that we’ve written and we’d love for you to check them out i think sometimes people don’t always have time to read into and we’re always here for those questions i thought this would be a great topic for people just to take a listen to if you’d like to share this out with other realtors first time home buyers move up buyers we’d love

For you to get the word out and let people know we’re here to help you can definitely call us anytime at 402-991-5153 or you can check us out on our website at mtg-specialists.com and again we’re always here for you feel free to reach out to us as time permits i hope you guys all have a great day and we’ll see you next week with the mortgage matters in minutes

Have a great one mortgage specialist driven trusted reliable

Transcribed from video
Mortgage Matters In Minutes #4 – Why Don't Sellers Like FHA Loans? By Mortgage Specialists LLC