Why should a seller consider an offer with FHA financing?
The Federal Housing Administration (FHA) was established in 1934 following the Great Depression. These innovative low down payment loans were intended to help more people become home owners with intentions of creating more stability in neighborhoods. Since then FHA has helped over 34 million people secure the dream of homeownership. Backed by the federal government, FHA provides safe mortgage insurance solutions while expanding its housing education and outreach efforts year after year. Continuous improvement keeps the dream alive for the next generation.
However, FHA insured mortgages have received a stigma in past years for creating a challenging transaction. Sellers seem to prefer conventional financing over an offer with an approved FHA buyer. Here are some reasons you, as a Seller, should consider an offer with FHA financing:
· FHA only provides full documentation loans. These buyers have been qualified on income and asset documentation.
· Lenders who can provide FHA mortgages have met stringent standards set by HUD.
· Appraisal requirements have improved to be “as is” instead of requiring cosmetic fixes. FHA is more concerned with health and safety to the occupant and structural soundness of the property as well as the security of the loan.
· Inspections for pest, wells, and septic are only required if requested by the lender or if the appraisal indicates one is needed.
· Non-allowable non-recurring closing costs to the buyer have been reduced to just the Tax Service Fee (this should be less than $100).
· FHA loans take no longer to process than conventional lending. With few exceptions, an FHA loan can be processed in the traditional 30 day escrow.
· FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. The exception to this anti-flipping rule is an REO property marketed and sold by property disposition firms on behalf of lenders / banks.