To FHA or not FHA, that is the Question….Here are cold hard the facts!

For folks who are looking to buy a home, they are often faced with the question of whether or not to apply for an FHA loan. If you are a first time home buyer or have a couple of bumps on your credit, it sounds like a great idea. You can buy a home with a credit score as low as 640, a down payment as low as 3.5% and have a debt to income ratio that is 50% or even greater.

If you want to buy a new home but do not want to sell you current home, you can use that higher debt to income ratio to support owning two homes at the same time. If you have great credit and enough income, an FHA mortgage will allow you to buy a home with a minimal down payment. You can get your entire down payment as a gift or get up to 6% of the purchase price in seller credits to cover the escrow deposits and closing expenses. If you use seller credits to pay for your upfront mortgage insurance premium, an FHA loan can even be less expensive than a conforming loan.

But what about those rumors that you hear that an FHA loan is the new subprime mortgage???? Are FHA loans for people with bad credit who cannot handle their personal finances???

If you live in a condominium, do you want people with FHA loans living in your building??? Will these folks be defaulting on their loans and condo association dues??? If you are on the Condo Association Board, are you doing the right thing by having your building eligible for FHA borrowers???

FHA BORROWERS ARE GREAT AND YOU WANT THEM IN YOUR BUILDING!!!!!!

Here are the COLD HARD facts about FHA borrowers and FHA eligible buildings:

• FHA insured nearly 40% of all purchase mortgages in 2010…roughly $200 billion
• The average credit score for a home buyer taking out an FHA-insured mortgage in the fourth quarter of 2010 was 701 – these were NOT subprime borrowers
• The maximum loan balance for an FHA loan is $410,000 compared to a maximum loan balance of $417,000 for conforming loans bought by Fannie Mae and Freddie Mac
• FHA mortgages can be used to buy beautiful homes in outstanding neighborhoods
• Currently, FHA mortgage rates are lower than conforming mortgage rates, indicating that the market prefers FHA loans to conforming loans
• FHA loans have been in existence since 1934, a few years longer than conforming loans insured by Fannie Mae – FHA loans are not a new form of lending
• It is easier for a Condo building to become FHA eligible than it is for the building to become eligible for buyers who want conforming loans

In this time of uncertain financial conditions, FHA loans are an opportunity for many decent folks to get access to a home for the first time or to find a larger home for their families. FHA borrowers are successful, responsible home buyers who would make any building a better place.

BUT why would you care to have your building FHA approved?

I know this is an exageration, but an extra 200 BILLION potential buyers for your condominium units should be enough of a reason to get your building FHA approved. To say this more concretely, getting your building FHA approved can open up your building to almost twice as many potential buyers. In this market, even one (1) extra potential buyer is worth the effort. More potential buyers mean more showings, more potential offers, the chance of higher offer prices and more sales in your building. Who does not want that?????

BUT what about the cost of getting your building FHA approved? THERE IS NONE! 

Yes, you need to gather some information together and get some forms filled out, but there are lots of friendly neighborhood bankers (like me!) who can assist you with putting together the application for FREE.

BOTTOM LINE: Today’s FHA borrower is just like you or me. This is NOT the new subprime borrower. In difficult financial times, FHA loans offer opportunities to borrowers with decent credit and good jobs. These are folks that you want as your neighbors. For Condo Associations and condo residents, having your building FHA approved is a “MUST HAVE”. FHA approval for a building opens up the unit to more good quality borrowers. This makes for more potential buyers and who does not want more buyers? All of this comes at a small cost to everyone involved!!