1. The FHA loan has became popular once again over the past 6 months mainly due to it being one of the only 100% financing loans able to use to buy a home. With all of the major mortgage companies going bankrupt around the country they all lost their ability to use their own loans. What I mean by using their own loans is that many companies, let’s say Quicken Loan for example worked with larger banks and investment firms and they wrote their own guidelines. This means that they made their own rules and as long as a bunch of underwriting guidelines were met than the loan could be written and sold on the secondary market for a profit.
FHA have always been a group of masters in knowing what makes human changes that show reality in commitment. Three little words “Utmost Good Faith” show the meaning of a persons understanding of long term commitment. Having people put out the effort to complete a one year of handling bad debt. In a positive manor for one year, brilliant making people complete their pledge in tangible way.
2. Realtors loved this during the days of the reify/purchase boom. Since the mortgage companies had their own guidelines a person looking to buy a home could buy just about anything they wanted as long as it had four walls and a roof. It was up to the person buying the home to make sure that the house was up to par with a home inspection.
FHA new that first time home buyers are experienced in home safety and preparedness. It’s that passionate conservative that gives helpful information and guidance for protecting that first time home buyer. Isn’t that what realtors are suppose to do?
3. The mortgage companies did have some standards (have to give them some credit). They would not allow you to buy a home that did not have any type of flooring covering the sub floor. This means that the whole house had to be carpeted, tiled, or wood floors down to cover the sub floor. The kitchen had to be complete. You could be missing a dishwasher or a fridge but the sink had to be in. The mortgage companies would find out when the appraisal got back because in the report it would state what is missing and there would be pictures on it too.
Too many companies knew they were only getting a drive by appraisal and didn’t say anything. Even I can take a picture of any kitchen, but is it the kitchen. Appraisers are not kept to the same standards as an FHA inspection.
4. Now when the FHA is the only option out there for people to get approved on a loan some new standards have been imposed. The FHA’s main guideline is that a home inspection must be done on top of an appraisal. An appraisal and a home inspection are two different things. An appraisal looks at the features of the homes compared to the other homes like it in the neighborhood and determines a value (even if it is missing flooring). A home inspection looks for things like leaky pipes, bad foundation, broken windows, bad roof, mold, and others.
It’s my belief that every home should have an inspection for insurance claims that maybe charged to the insurance company for damage not reported, because of the noncompliance of the insurance company’s responsibilities to the homeowner in explaining their policy’s value to the homeowner. This is a violation of law in every state in the union.
5. If the home that the buyers put an offer on fails the home inspection than the loan cannot be closed until all of those things that made it fail the inspection are cleared up. At that time the loan can close. In reality though, how many people are going to go and dig into whatever space they might have on their home equity line of credit just to fix up the house to be able to sell it to you in a couple months after all of the repairs are fixed. What they are going to do is wait until somebody else comes around that is approved on a conventional 30 year fixed rate mortgage that does not need to pass a home inspection to sell the home. More than likely the people trying to sell the home are probably upside down on their home anyways and can’t afford to put any money into it because then they will need to bring money to closing. If somebody does not come to them with a normal conventional loan they will probably have to foreclose on the house.
The lack of understanding homeowners insurance is ramped in America today. It affects hundreds of thousands of homeowners in protecting the integrity of their home. The mortgage company made you purchase insurance to protect their investment. Since the Insurance commissioner is not going to do their job in protecting the homeowner. Maybe the mortgage company could explain the policy and how to use it to protect the integrity of the investment to the homeowner.
6. With the home not passing the inspection you already know what the look on your realtors face is going to look like. It’s going to be one of disbelief and anger at the same time. Since realtors get paid on commission they just wasted a bunch of time on a deal that has a 95% chance of not closing now. The realtor can either keep looking with you for new homes or just bail on you completely. In this real estate market you might get lucky and find somebody who will stick with you because the realtor is not closing a lot of deals right now because not that many people are getting approved on mortgages at all.
Or find a public adjuster that will do a home inspection for insurance so the monies needed to bring the home to pre-loss condition are made available to the homeowner to complete the work. If a public adjuster is not in your area having a realty firm sending one of their realtors or a employee to the only public adjusting school in America would do two things. First it would solve the immediate problem and show good faith with their client’s, second it would bring in large sums of cash flow into the realtor firm maybe even doubling the firms income.
7. The FHA requires all borrowers to escrow their property taxes and homeowners insurance with their mortgage payment. This means that they now have to bring more money to the closing table to suffice what they need. In total they need money for escrow, down payment, and closing costs. More than likely the person looking to buy a home does not have this kind of money in a bank account any where so this becomes a lost cause.
More realtors should think like farmers. A farmer prepares the ground the year before so his crops will yield a plentiful crop the next year. I use to help client’s to prepare for their purchase of a home the year before for credit and down payment in helping them put together a plan. Now since I controlled the paper work I also made sure the client purchased their loan from us. This also had a great byproduct of referrals, I believe the life blood of a good realtor.
8. FHA loans require twice as much paperwork to complete a loan than a normal loan. With all of this paperwork mandated by the FHA there always seems to be something that pops up and deters the loan from closing. This alone can drive a realtor crazy because all they want to do is show you a house that you like and close the deal so they can move on to the next client.
The richest people in the world have found a niche in business and they then did it over and over again to the point that they controlled and refined a consistent market place. I believe realtors have the ability to use continuing education in our high schools as the ferial fields to find their clients without any cost to them. The realtor starts prepping their crop of new home buyers using FHA to control the client, sounds like a plan to me. Email me for additional information mhouser@thecompletementor.com .
9. If you are in the market to buy a home and are using a pre-approval from a mortgage company using a FHA loan you better get a move on. FHA is implementing new guidelines that gets rid of all down payment assistance programs and requires borrowers to come to the table with 3.5% down payment now. If you want to get into a house and can only get approved on FHA you better start hustling because it takes most mortgage companies 3 weeks to close a loan and about 4 weeks to close an FHA loan due to its lengthy paperwork.
People don’t care about their credit rating until they want to buy a home. If it wasn’t for FHA many people would not have the chance to own a home and start their futures with a helping hand not a hand out.
10. If you want to see your realtor make a funny face just say the words “FHA” to them. You will probably be asked if this was your only loan that you could get approved on. Do not be insulted because of it, the realtor is just trying to cover their butt and not waste a lot of time showing you houses that you will never be able to close on. With so many quirky guidelines you can see why the FHA does this. To really see why they are so stringent you need to step into their shoes. Why would I want to lend you money on something that is not even up to code? If I lent you the money and you defaulted on the home than all I (the FHA) would own is home that is broken down, beat up, and probably needs thousands of dollars to bring it up to code to hopefully sell it. I guess we can thank the U.S Government for doing at least one thing right and making sure we are not buying run down houses. Be sure your realtor is a strong FHA realtor if not find another realtor trust me they are out their. Ask your FHA loan officer for the realtors that are.
