Big Foot Sightings and FHA Loans
Even though I have a sticker on my truck that says “I Believe” in Big Foot, I’ve never actually seen one. But I’ve heard stories and watched TV shows about supposed sightings, and I’ve talked about these stories with friends, even though I’ve never seen Big Foot myself. These sightings are like the stories real estate agents tell about FHA loans, claiming they make it hard for buyers to get their offers accepted, especially in situations with multiple bids. They say FHA appraisers are tough on houses and that FHA loans can ruin deals. These stories have been around for over 30 years, but many agents haven’t experienced them firsthand—they just pass along what they’ve heard.
These are the same agents who always recommend getting a home inspection, which I think is a good idea most of the time. Most inspections happen within 7-10 days of signing the contract and mostly uncover minor maintenance or safety issues. Interestingly, FHA appraisers look for the same things, along with conventional appraisers in many cases. I’ve talked to several appraisers, and they’ve relayed to me that, with some minor differences, appraising a house for an FHA loan is pretty much the same as for a conventional loan. They also said that if the borrower gets an inspection, any issues will likely show up on the appraisal report as well.
FHA appraisals usually take 10 days or less, which is about the same time frame as a home inspection, often falling within the due diligence period. So, buyers can choose the program they prefer, and sellers might even make more money in some cases.
In my experience handling over 200 loan applications last year, none of them failed due to an FHA appraisal issue, but many fell through because of a bad home inspection.
FHA rates are typically about 0.375% lower than conventional loan rates, and this difference might be even bigger for borrowers with lower credit scores. FHA loans also allow for higher debt-to-income ratios, only require a minimum down payment of 3.5%, and sometimes have lower monthly PMI payments, depending on the borrower’s credit score.
So, FHA loans aren’t really that different from conventional loans. If an FHA offer gets your seller more money, and any appraisal issues can be addressed within the due diligence period, maybe recommending that offer to your seller isn’t such a bad idea. Hopefully, just as the legend of Big Foot will likely endure for many more years, the myth and misinformation surrounding FHA loans will eventually fade away, allowing more people to achieve the dream of homeownership.
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, February 29, 2024