FHA vs. 20% Down.... CAN YOU HEAR ME NOW?

CAN YOU HEAR ME NOW??? FHA must now be the new Sub Prime!!!

Last week by a show of hands at our Wednesday sales meeting of nearly 200 agents it was anectdotally confirmed that the majority of our deals at our 7 offices were FHA deals???

How did that happen? FHA was a language, not unlike Sanskrit, long forgotten in the San Francisco real estate market as loan limits were too low for anyone to really use. ($417,000 - the 'old' conforming loan limit.) Now that the the jumbo conforming loan limit is up to $729,750 any number of properties are within range of buyers who have less than 20% down.

2 of the 10 escrows I currently have open are FHA and they for some reason are closing easier and faster than the escrows with 20% or more down. Hmmm... What does this say about lending?

Apparently:

If you have 20% or more - you will be asked for additional documentation as to where the down-payment came from, in addition it seems that 20% or more borrowers are subject to greater scrutiny.

If you have less than 20% down and are willing to pay mortgage insurance you can PURCHASE a qualifying home up to the limits allowed with less documentation and if you have extra $$$$ - YOU can hold onto it for reserves and repairs.

If packaged right under the FHA-203(k or b) guidelines you can even finance repairs and wrap it all into one loan under FHA guidelines.

In short - FHA loans have become our new sub-prime mortgage market as it fuels a bottom up recovery of our housing market.

So my advice to listing agents who are skittish about accepting an offer from FHA buyers - THINK AGAIN!!! The loan process apparently is smoother as only FHA CERTIFIED mortgage brokers or direct lenders may originate these loans. Typically in SF - the FHA CERTIFIED lender is more experienced, has a bigger pool of resources and can get possibly even get the loan with less hiccups than the conventional lender/mortgage broker. Wow - I've since learned to speak Sanskrit - er uh FHA since it's now the de-facto language of properties selling up to about $800k in San Francisco.

If you're a buyer interested in contacting an FHA Certified Mortgage Broker or Direct Lender - let me know and I'll put you in touch with three that have performed well for my clients!

Michael Ackerman, Zephyr Real Estate, 415-695-2715

ABZ@ZephyrSF.com