|Tips for frustrated FHA buyers in tough times
Being a Federal Housing Authority buyer right now is tough.
Being any kind of buyer right now is hard but "FHA-ers" have it the worst.
For most first-time buyers, money is tight and they look towards an FHA loan as a means to purchase a home.
Established by the National Housing Act of 1934, FHA-insured loans are a type of federal assistance that have historically allowed Americans to borrow money for the purchase of a home they would not otherwise be able to afford.
Keep in mind, the FHA does not make loans but insures them from reputable private lenders and institutions.
The best thing about an FHA loan is it only requires a 3.5 percent down payment and allows for up to 6 percent credit of the purchase price towards the buyer's closing costs. So what's the challenge?
The challenge is most FHA buyers are looking under $350,000. This also happens to be where most buyers in Sonoma County are looking at right now.
This equals to about 20 buyers for every home currently hitting the market. Since there is little inventory, first-timers have the hardest time competing with buyers with conventional financing with considerably more down or even worse, cash buyers willing to waive appraisals and shorten their inspection timelines in order to get their offers accepted.
What makes matters worse, is many first-timers also look at condos and townhouses as their starter home and are finding less and less complexes qualify for FHA financing. Even condos and townhouses that were "FHA approved" at one time are not able to qualify now because cash investors have soured many complexes by buying these units up and renting them out.
This tilts the scales of the owner-occupancy ration and many lenders will not lend in a complex where more than 40 percent of the units are rented. It's a horrendous cycle.
For FHA Buyers frustrated with the market, I offer two suggestions.
First, talk with your lender and see what would be required to qualify for a conventional loan.
Some lenders offer conventional loans with as little as 5 percent down. The other suggestion would be to just have some patience.
The market is always the slowest at the holidays, and inventory is the lowest of the year from Halloween to New Year’s Day.
It should be a wonderful turning point for our market in 2003.
And that's my 2 cents worth.
Ken Schrier is a licensed Realtor and Certified Distressed Property Expert working locally for RE/MAX PROs. His focus is working with Buyers and Sellers throughout Sonoma and Marin Counties. He can be reached at 707-529-4819 or through his website www.KenSchrier.com.