FHA Home Loans – Fixes To Common Problems For Borrowers – Part 2

FHA Home Loans –

Fixes To Common Problems For Borrowers – Part 2

As we discussed in our previous article, more and more homebuyers in the current market are using FHA Home loans for the purchase of their homes.

These types of loan offer lower down payments then conventional home loans and are often the preferred home loan for first time home buyers, which make up a large percentage of the current home buying market.

Not only are down payments lower, but these are government backed loan programs that offer low interest rates and fixed terms. However, it is also very important that in the current marketplace, home buyers are prepared for some of the potential issues that they may run into with an FHA loan.

That is to say that to obtain an FHA home loan there are sometimes different standards that properties are held to. This week will present additional information on another potential issue in regard obtaining an FHA home loan and how to get past it.

POTENTIAL PROBLEM: Appraisal Values

In today’s market, where the majority of sales are short sales and foreclosures, appraisals are now a major issue in that there is a definite potential for the appraised value of a purchase price to come in at less than the purchase price.

Of course when this occurs, this causes issues with obtaining an FHA home loan, as the FHA will use the lower of the appraised value or purchase price to value the loan they will give you on the home.

Meaning that if you agree to purchase a home for $100,000, but the home only appraises for $90,000, the FHA will consider $90,000 to be one 100% of the purchase price. What this means is that you will now need to bring about an additional $10,000 down payment to close on the home. This is obviously a transaction breaker for many buyers and a problem that needs a solution.

SOLUTION: Renegotiate the price

In recent history if a property appraised for below the purchase price, the onus was often put upon the buyer to either come up with the difference between appraised value or purchase price or cancel the contract.

However, in the current marketplace, this is not the case anymore as even though there is a healthy appetite for bank owned homes and other properties, sellers are now more than ever inclined to reduce the sales price if a property does not appraise at the purchase price.

That is because if the property does not appraise for the buyer now, it will most likely not appraise for the next buyer either. Furthermore, FHA appraisals also stay with properties for six months, meaning that if a new buyer were to try and purchase the home shortly after using FHA financing they would run into the same issue.

Therefore, more and more often now, if a property does not appraise and the buyer documents this information to the seller, there is a higher chance that they can renegotiate the property purchase price to the appraisal price.

Of course, there is also an appeals process to the FHA for what may be considered a low appraisal. In this case documented, verifiable comparable sales that were not considered o the original appraisal itself can be submitted and asked to be considered for a new value, but this more often than not may be the best solution as the FHA already has in place strict standards for the comparables that must be used for an acceptable FHA appraisal.

However, asking the seller to reduce the sales price of a home based on a lower appraised value can be a solution to one of the key limitations to homeowners looking to obtain an FHA loans for the purchase of their new home.

This is just one solution to potential roadblocks for FHA home loans. Next week we will provide even more tips and solutions for common problems for borrowers obtaining FHA home loans.

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For more information on current programs for existing and potential homeowners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com