Should Sellers be Leery of Accepting Offers from Buyers Approved for FHA Financing

Should Sellers be Leery of Accepting Offers 

from Buyers Approved for FHA Financing?

Years ago and even now, it's not unheard of to hear Sellers express a wariness about accepting offers from FHA Buyers ...  

Typically these Sellers' uneasiness is based on stories they've heard about the difficulty of passing an FHA Appraisal.  They think they'll be required to make their home "right for FHA Financing".   

The prevailing thought is that FHA ... or the Lender ... will require a long list of repairs to be done prior to Closing.  That a Seller needs to get their home in FHA "financeable" shape and the costs of doing those repairs will be all theirs to shoulder. 

I can tell you, having been an FHA-Approved Appraiser (and now as a Mortgage Originator), that I've always felt that those fears were/are often a bit unwarranted by the real estate community and the selling public.  In many cases, the issues raised by an Appraiser can be addressed reasonably easy.  

In my experience, the below are typically the property issues raised most often by FHA Appraisers:

• Peeling paint:  Was and still is an issue for homes built before 1978.  (Lead was used in paints until the year, 1978.  Lead poisoning is a health concern/issue.) 
• Certifications Required:  Certifications for Roofing, Heating, Plumbing, Electrical, Structural Contractors were most often requested. (Functionality of "major components" of real concern as determined by the Appraiser of Record)
• "Nit-Picky" items:  Items determined by a so-called "nit-picky" Appraiser

But I've always found that the mindset of FHA has always been and remains:  If a homebuyer moves into a home and finds themselves having to deal with health hazards, major repairs, or replacements soon after Closing, it could cause the Borrower great financial stress.  It could  result in a default on their mortgage.  It could preclude a Foreclosure. 

Common sense will tell you ... FHA doesn't want that to happen.  They don't want to be the "cause" of that happening to anyone.

FHA believes a certain level or standard of property "fitness" should be met.  But requests for property repairs are often seen as unreasonable and placing hardships on Sellers.  

As a result, Sellers oftentimes object to FHA Financing on a Contract - even when the requests by FHA Appraisers for repair(s) are justified.  Their rejection of FHA Financing offers can create roadblocks to Contract completion ... or undue hardships on the prospective Buyer.

Recently, I was assisting Borrowers where the Sellers of the property they hoped to buy insisted on Conventional-ONLY Financing.  Due to "credit issues" the Borrowers involved were subject to what in financing is called "a Waiting Period after a Significant Event".  

Their loan application could have been approved with FHA Financing terms, but the waiting period in play created a hard stop for a Conventional Loan with "normal" terms and rates. 

In this particular case, the Sellers were NOT willing to accept the offer made by my Borrowers with FHA Financing.  That decision in turn, kept their property on the market.  

Why did they make that decision?  

The Sellers were unwilling or unable to "expose" themselves to an FHA Appraisal.  They didn't want to face any possible FHA repairs or conditions interjected by an Appraisal for FHA Financing purposes.

But in actuality, in today's current market, what do FHA Appraisers typically require?  What repairs do they typically require to be made? 

Unfortunately, there is no one definitive resource that provides an answer.  Even FHA handbooks and publications themselves offer somewhat vague direction.

The stance by FHA in recent years has been to move the responsibility to the Lender's Underwriter and the Lender's assigned Appraiser.  They must determine the repair needs of a given property.  The days of ordering certifications and other costly unwarranted repairs on an FHA Appraisal are pretty much a thing of the past.  

While it must be pointed out that every market varies ... and every Appraiser's stance also varies ... FHA Financing does NOT have to be viewed as a "deal killer".  

For the most part, HOME INSPECTIONS have taken the guesswork out of the FHA Appraiser's "to do list".  The role of the Appraisal should now be viewed as more of a "Value Protection" for both the Buyer and the Lender.

For deals to die on the vine over long-standing old-school mindsets surrounding the negatives of FHA Financing, was/would be unfortunate.  Those of us that must know what an FHA Appraiser will require regarding appraised properties, should keep "safe, sanitary, and sound" in mind as our rule-of-thumb in these instances.  

Below I've included an example of a case where the sellers DID comply with an FHA contract and resulting Appraisal ...  

Here is the verbiage included in the FHA Appraisal and what was required by the FHA-Certified Appraiser involved during that transaction:  

     "The Subject was built prior to 1978 and thus there is a possibility of the existence of lead-based paint in the home."

• Evidence of cracked and peeling paint was found at the time of the inspection on almost all surfaces of the exterior of the home, garage and the shed
• Home requires exterior scraping and re-painting on nearly entire exterior siding, trim, and soffits
• Shed, garage, and house exterior also show minor signs of wood rot
• Shed was locked at time of inspection.  A re-inspection will be required to view shed interior
• The patio is dug-out of the original grade and has three perimeter walls surrounding.  All perimeter walls present falling hazards and exceed 36 inches in height.  A full-surround safety railing is recommended to prevent accidental falling

The above showcases the Appraiser's method of reasoning and prevailing mindset regarding the current safety and soundness ... the "fitness" of the property being viewed.  It also provides a prime example of how FHA deals can close when the Seller keeps an open mind.   

As that is just what happened.  The Sellers made the required repairs quickly and relatively easily (and inexpensively) and kept their transaction moving forward to successful completion.  Their desired result ... a SOLD home ... was achieved.

Each Seller must determine their own transaction's path and destiny.  The best outcomes, however, are found when all options are left on the table and considered fully.

I say in appropriate situations, those options should include the consideration of accepting a Buyer making an offer with FHA Financing ... 

* When in need of Mortgage info or service when buying, refinancing, or Investing in a home in New Lenox - elsewhere in Chicagoland - IL & WI, contact me. I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

   

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena,
Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook,
Romeoville, Naperville, etc.), DuPage County, the City of Chicago,
Cook County, and elsewhere within IL & WI.


Referrals are Appreciated and Welcomed

Happy Thanksgiving!

A Mortgage Message So Important, it Bears Repeating

A Mortgage Message So Important, 

it Bears Repeating

Home buying is often spoken of as an uphill, stressful challenge ...

And while it's true that there's much to know and do during the mortgage process ... the following is also true:  

Buyers retain much of the control in determining how quickly and fluidly they navigate the process.

You ask, "how?"  Education and knowledge.  

Simply, borrowers that gain a working knowledge of how the mortgage process works and progresses, know what will be expected of them, and stay engaged and utilize that knowledge ... help themselves immensely prior to and throughout their mortgage process.  

That knowledge is powerful.  That knowledge helps during their decision-making.  It helps them retain control of their destiny.

Sadly, commonly held misconceptions surrounding the mortgage process linger, both in publicly-shared stories and on the internet.  All too often, these misconceptions contribute to buyers' fears and elevate the level of stress they feel when entering into home buying and financing.  

Suffice it to say, as a Mortgage Originator I consider challenging and dispelling misconceptions surrounding the mortgage process absolutely paramount. As one of my main responsibilities. 

So when asked what one piece of advice ... what one action ... will reap the best results for the greatest number of home buyers/borrowers, I offer:

"Don't wait until you're ready to view homes. Seek the advice and assistance of the most experienced Loan Officer you can find ... as early in the process as possible."

I can't stress this advice enough.  The more time allowed for preparation, the better.  The results of this one action can be amazing.

I'm not saying that conducting an individual and personal search for information and performing your own preliminary homework isn't important.  It is.  The more you know, the better.

So consider conducting some of the following searches (and a few of your own) for info and guidance:

• Don't know where to start your home buying and financing journey? Who helps you during your journey to home ownership?  Click here for that info ... or here for an easily-followed infographic. 

       Misconception erased:  Help is hard to find.  Not true!

• Need help choosing your Mortgage Originator?  Click here to see what Originator attributes will serve your needs best. Click here for even more guidance ...

       Misconception:  All Lenders (and Originators) are created equal.  Not True!  Great differences in mortgage programs offered, education, experience, expertise, and ability exist!

• Unsure how a Lender uses your credit history and scores to determine a mortgage approval?  Click here for an article that explains this process.

       Misconception:  I need great credit to buy a home.  Definitely not true!

• Unfamiliar with what mortgage programs may be available to you?  What down payment you'll need to qualify for those programs?  Click here for the basic information you'll need.

       Misconception:  You need a 20% down payment to buy and finance a home.  Completely untrue!  No-and-Low down payment financing options exist and can help you buy!

• Are you a Veteran in search of financing?  Click here for valuable information.

       Misconception:  Veterans can use their VA benefit only one time.  (And many other myths) NOT TRUE!

• Is Private Mortgage Insurance a possibility?  Click here for some valuable facts that will help you decide or prepare. 

       Misconception:  Using Private Mortgage Insurance to finance a home is never a good idea.  Certainly not true! 

• Want to get a head start on gathering the documentation needed for your Mortgage Application?  Click here for a list of those documents typically requested by Lenders.

       Misconception:  Mortgage Application is hard because you need so many documents.  Not True.  With a little preparation and planning, it can be done quickly and easily.

• Are you a First-Time Home Buyer considering the purchase of a Condominium or Townhome?  Click here for the important info you must have.

       Misconception:  You can always tell the difference between a Condo and Townhome just by looking at them.  Not True ... and working with an experienced knowledgeable agent and Originator can make the difference between a successful purchase and failure! 

• Dreaming of buying a new construction home?  Click here to find out what possibilities exist.

           Misconception:  Buying a new construction home is the same as buying an existing home?  Not true ... important differences exist and knowing those differences is very beneficial. 

• Already a home buyer, but want to buy and finance again (or refinance)?  Click here for the info you'll need to get started. 

          Misconception:  Once you've been approved for a            mortgage, you don't need to apply or be approved for a new mortgage when purchasing again in the future.  Not true! 

• Considering an Investment Property purchase?  Click here for some valuable info that will help you get started.

       Misconception:  You need a huge down payment to buy an Investment Property.  Not True ... options exist with only 15% down!

You'll know much after reading the info offered above.  But it bears repeating ...

While conducting research and homework on your own is important, the high value of seeking and working with the best source available for credible reliable financing information ... a Mortgage Originator ... can't be overstated.  

A Mortgage Originator will assist you in determining what is fact versus what is fiction regarding YOUR personal financial scenario.  They will remove any misconceptions you may hold regarding YOUR personal prospects and options for successful financing. 

The mortgage process is increasingly personal to your specific credit standing and finances and the specific home you wish to buy/finance.  (Click here for more info).  And comparisons to another's home buying and mortgage or application experience should be avoided at all costs.

Why?

Too often misconceptions formed and erroneously held "facts" scare people away from home buying and financing.  Or they elevate the stress levels of those applying for a mortgage.  

The misconceptions and source(s) of stress and fear are easily addressed by reaching out to an experienced knowledgeable mortgage professional.  Whether it's credit or monetary in nature, actions and improvements made under the guidance of your Mortgage Originator can eliminate many of the challenges others face during mortgage underwriting.  That, in turn, lowers the stress you may feel when seeking mortgage approval.  

Why stress over things that are not true or may never occur during your financing?   

Battle these and other misconceptions.  Get the facts.  If buying, refinancing or buying an investment property in New Lenox - Will County - Chicagoland/IL - WI, talk to me and ask your questions right away.  As soon as you decide to buy.

By taking this one simple action, you can erase any misconceptions held and gain the information you need to prepare for and navigate your mortgage process as smoothly, easily, and quickly as possible.  

Contact me!

I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI Licensed #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell or Text: 708.921.6331

eFax: 815.524.2281

www.genemundt.com

gmundt@goapmc.com

  

             

      

    

Gene Mundt, Mortgage Originator, a Mortgage Originator with 40+ years of #mortgage experience, that will offer you exemplary mortgage service and advice when seeking: #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including: The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of #Chicago, #Cook County, and elsewhere within IL and Wisconsin.

Your Referrals & Testimonials are Always Greatly Appreciated!