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      05-08-2011, 09:12 AM   #1
08rookie
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FHA loan for a 1st time home buyer...advice please??

just curious if anybody here had experience with and FHA loan, specifically a FHA inspector, when buying a house?

how picky are they? the decision really rests on their inspection to see if the deal goes through?? if the bank pre approved me, we find a place, the seller accepts my offer, then the fha inspector comes out and is like hmmmm that door needs to be painted sooo no deal broski??? thats a buzz kill huhhh
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      05-08-2011, 09:20 AM   #2
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FHA regulations are strict and the inspectors can be really picky. They are mostly looking for safety hazards, like railings missing. But they also look for chipping paint and unfinished construction.
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      05-08-2011, 09:57 AM   #3
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FHA only insures loans...they do not make loans directly. They are technically "FHA insured loans" because they are insured by FHA, but private lenders lend the funds for the loan.

FHA does NOT HAVE STRICT GUIDELINES ON WHO CAN DO FHA LOANS.

The reason smaller lenders choose not to do FHA loans is that the application fees to get approved are in the thousands of dollars..small lenders don't see FHA insured loans as being profitable enough to go to the trouble.
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      05-08-2011, 09:58 AM   #4
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Save an extra few grand and put 5%-10% down and then find a bank that'll give you a conventional loan based on that DP... then it won't be an issue.


Ultimately it'll amount to you not qualifying for your financing, so whatever earnest money you put down will be refunded. You won't get the house, but you wont' be out anything either.
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      05-08-2011, 10:24 AM   #5
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The FHA inspectors have strict guidelines.



Quote:
Originally Posted by Gixxermike750 View Post
FHA only insures loans...they do not make loans directly. They are technically "FHA insured loans" because they are insured by FHA, but private lenders lend the funds for the loan.

FHA does NOT HAVE STRICT GUIDELINES ON WHO CAN DO FHA LOANS.

The reason smaller lenders choose not to do FHA loans is that the application fees to get approved are in the thousands of dollars..small lenders don't see FHA insured loans as being profitable enough to go to the trouble.
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      05-08-2011, 01:21 PM   #6
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As far as I am aware the FHA do not have their own inspectors/appraisers, they just have an approved list. Depending on where you live you may have the option of choosing the inspector, but you will never have the choice of choosing the appraiser, that is up to the bank.

The appraisers job is to tell the bank if they believe the property is worth the agreed purchase price so the bank can complete the financing process.

The home inspector's job is to do a thorough examination of the structure and mechanical parts of the property and let you know if they believe they are up to par. Most home inspectors will warranty everything they pass for about a year after. In the contract there is a deadline to have this done and when written reports must be given to all parties, this is called 'delivery'. You will then have x # for days to make your 'objections' based on this report and then the seller will then have x # of days to offer 'resolutions' to any objections you may have.

The process is pretty similar throughout the country, the only major differences is who picks up the tab.

When writing an offer for a buyer I always request that the seller pay for appraisals and inspections. Why? Because they set the asking price and I want them to justify that price with a professional appraisal. I also want them to prove that the home is in good condition for my buyer when they purchase. I don't want my buyer to have to fork out hundreds of dollars to find out either a) bank won't finance or b) they are major problems.

Good luck in your search!
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      05-08-2011, 01:45 PM   #7
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Quote:
Originally Posted by Feyd View Post
Save an extra few grand and put 5%-10% down and then find a bank that'll give you a conventional loan based on that DP... then it won't be an issue.


Ultimately it'll amount to you not qualifying for your financing, so whatever earnest money you put down will be refunded. You won't get the house, but you wont' be out anything either.
i thought you can only get a conventional loan with 20% down??
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      05-08-2011, 02:07 PM   #8
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Quote:
Originally Posted by 08rookie View Post
i thought you can only get a conventional loan with 20% down??
If you go through a "bank", then yes. However a mortgage broker can shop banks/rates, etc and work things a bit to find programs for 5% and 10% down. They typically have way more latitude for negotiation because they aren't held to the same restrictions that a B of A (for instance) would be if you were just to walk in off the street.

It's honestly not all that uncommon for a broker to find you a "Bank of America" loan (again, just an example) with a lower rate than Bank of America would offer you directly. This is possible because brokers/brokerage firms will typically underwrite your loan and then resell it (+ a bunch of others that they've recently written) back to a bank as a large group. Because it's a large grouping the bank will allow a lower rate for some of the loans because they'll be making up for it with some of the other loans in that same grouping that might have higher rates.



You'll still have to pay PMI, etc... but you won't have to deal with the "FHA" inspector or any potential issues that might arise from the inspection. I was just giving you an option to try and sidestep that aspect of the buying process since you were so worried about it.
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      05-09-2011, 10:36 AM   #9
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FHA is a horrible way to purchase a home. It may have been effective in the years after the Great Depression and WWII but the way the system is setup right now is a quick route to foreclosure. Save the 20% down for a conventional loan.
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      05-09-2011, 01:43 PM   #10
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How is it the quick way to foreclosure?

You get a mortgage, you make your payments on time every month and there is 0% chance of foreclosure no matter which route you take.
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      05-09-2011, 02:15 PM   #11
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Quote:
Originally Posted by MediaArtist View Post
FHA is a horrible way to purchase a home. It may have been effective in the years after the Great Depression and WWII but the way the system is setup right now is a quick route to foreclosure. Save the 20% down for a conventional loan.
If you are overextending yourself then yes I would agree with you. I purchased a foreclosure last month using FHA and had no issues whatsoever. From what I have heard this sounds more like the exception than the rule but it is worth a shot.
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      05-09-2011, 02:57 PM   #12
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Quote:
Originally Posted by ABQ325i View Post
How is it the quick way to foreclosure?

You get a mortgage, you make your payments on time every month and there is 0% chance of foreclosure no matter which route you take.
That's a very simple, and incorrect way to think about financing a home. That line of thinking has gotten many in trouble with cars, with credit cards, and other loans. Just because you can afford a monthly payment based on a skewed/extended back end debt/income ratio doesn't mean there is "0%" chance of foreclosure. In fact, the statistics say you are very wrong on that assumption.

About 1 in 10 FHA applicants go into some form of default after getting their loan, and it's rising:
http://www.washingtonpost.com/wp-dyn...020103527.html

If you can only afford 3.5% down, it shows that you don't have enough skin in the game. Be disciplined and save some cash.
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      05-09-2011, 09:51 PM   #13
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Quote:
Originally Posted by wakeboarder109 View Post
If you are overextending yourself
That line is the key. If you are not overextending then my statement is correct, barring any unforeseen job loss. However an unforeseen job loss will affect a home owner with more 'skin in the game' pretty much the same way.

Just because less than 1 in 10 FHA home owners have missed three mortgage payments doesn't make FHA backed loans a quick way to foreclosure.
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      05-09-2011, 11:27 PM   #14
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Quote:
Originally Posted by ABQ325i View Post
Just because less than 1 in 10 FHA home owners have missed three mortgage payments doesn't make FHA backed loans a quick way to foreclosure.
He doesn't know what he's talking about. He's making blanket statements that are flawed beyond belief. For example

"Just because you can afford a monthly payment based on a skewed/extended back end debt/income ratio"

Apparently the FHA is rigged for failure in his eyes. From what I've seen they are the strictest with what you can qualify for. I wasn't them offering liar loans...

Last edited by TMNT; 05-09-2011 at 11:34 PM.
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      05-10-2011, 12:41 PM   #15
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FHA is strict?

They allow a 29/41 front/back end debt ratio. You can't even qualify for traditional financing from most of the major banks (BofA, Wells, Chase) at a 41% back end ratio. But you can using FHA financing.

I don't know what I'm talking about?
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      05-10-2011, 01:00 PM   #16
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Quote:
Originally Posted by MediaArtist View Post
FHA is strict?

They allow a 29/41 front/back end debt ratio. You can't even qualify for traditional financing from most of the major banks (BofA, Wells, Chase) at a 41% back end ratio. But you can using FHA financing.

I don't know what I'm talking about?
FHA is more lenient. They allow lower credit scores, higher DTI ratios, and less money down. However your statement regarding them as "horrible loans and a quick way to foreclosure" is down right ignorant. They have their time and place and are usually rather solid loans. It's not sub-prime or private party loans...they do have guidelines.

Also, you ratios are way off...Fannie Mae will allow up 43%, then 50% case by case. FHA will allow up to 55%...fyi
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      05-10-2011, 03:28 PM   #17
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Also, you ratios are way off...Fannie Mae will allow up 43%, then 50% case by case. FHA will allow up to 55%...fyi
No you're simply wrong:
http://www.fhaloan.com/fha_debt.cfm

They allow a 29/41% front/back end ratio, if a bank tries to underwrite a loan with a higher back end ratio, they have to justify it to prove that anything higher than a 41% ratio is an "acceptable risk".

You really think someone who is using 41%, or 55% (per your claim), of their net income going to debt related expenses is not at threat of foreclosure? Whether you choose to call it "subprime" or not, it is subprime. You only need a 580 credit score to qualify for crying out loud. That's subprime as subprime gets.

Solid loans maybe shortly after WWII. I won't get into immaturity and trade personal insults with you, but facts are facts. A loan product that has nearly a 10% default rate isn't solid, it's broken and has been for a while. The simple fact that they've spent the past 2 years trying to fix it is proof of that.

FHA is just another way for people who are not credit worthy to put themselves into more debt that they probably can't handle.
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Last edited by MediaArtist; 05-10-2011 at 03:42 PM.
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      05-10-2011, 04:32 PM   #18
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Not saying you would play into it but, as a FYI, realize that the potential for pushing or "advising" you into a mortgage that is larger than you should take on is still ever present. It amazes me that, in this day, there are still mortgage brokers and companies doing this. Please be aware of what your mandatory month to month expenses are and realize that it might differ from what whoever you are dealing with for your mortgage considers mandatory. Also, part of the joy of home ownership is fixing/replacing/remodeling stuff or paying someone to so be sure to allocate a small slush fund for housing 'stuff' that can be scaled to the age and condition of whatever property you are buying.
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      05-10-2011, 04:39 PM   #19
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Quote:
Originally Posted by MediaArtist View Post
No you're simply wrong:
http://www.fhaloan.com/fha_debt.cfm

They allow a 29/41% front/back end ratio, if a bank tries to underwrite a loan with a higher back end ratio, they have to justify it to prove that anything higher than a 41% ratio is an "acceptable risk".

You really think someone who is using 41%, or 55% (per your claim), of their net income going to debt related expenses is not at threat of foreclosure? Whether you choose to call it "subprime" or not, it is subprime. You only need a 580 credit score to qualify for crying out loud. That's subprime as subprime gets.

Solid loans maybe shortly after WWII. I won't get into immaturity and trade personal insults with you, but facts are facts. A loan product that has nearly a 10% default rate isn't solid, it's broken and has been for a while. The simple fact that they've spent the past 2 years trying to fix it is proof of that.

FHA is just another way for people who are not credit worthy to put themselves into more debt that they probably can't handle.
No, I'm not wrong. I can see you aren't in the industry. I don't get my facts from web-sites...I get it directly from the lenders I work with who underwrite these loans.

I just got got an FHA loan through with 55% DTI ratio. Of course there has to be trade offs for higher dti such as assets, low ltv, reserves, etc. But the fact remains they go thru and are readily available for those who can qualify. Credit Score minimums have INCREASED since the 580 days. Minimum standard is 620 now, while not great it's decent. There are no "sub-prime" loans anymore.

FHA is a great loan for first time home buyers, whether you think so or not, is moot. You might want to do a little more research. You think they would continue to make FHA loans if they weren't getting their money back? Of course they wouldn't.

I respectfully disagree 100% with everything you have said.
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      05-10-2011, 04:52 PM   #20
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Quote:
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I just got got an FHA loan through with 55% DTI ratio.

Minimum standard is 620 now

There are no "sub-prime" loans anymore.
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      05-10-2011, 05:01 PM   #21
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Quote:
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HUH?

Not sure what you are getting at...Care to elaborate?

Lenders will go as low as 620, some will only go as low as 640, etc etc...some will allow much higher dti if you can show other incentives as I already explained. I never said I took a borrower with 620 score into a 55% dti ratio FHA loan....I am saying you can get an FHA loan with a 620 score and you can also get a loan with a DTI as high as 55%. The key is to offset with reserves or low ltv or other. What part don't you understand?

Sub-prime loans are NOT being made. This is not a sub-prime loan. Sub prime borrowers are allowed mortgage lates and other lates...FHA is much stricter than sub-prime was...and they are continually increasing that as well.

I hope that spells it out clearly enough for you.
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      05-10-2011, 05:26 PM   #22
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HUH?
Sub-prime loans are NOT being made.
FHA Delinquency Rate May 2010: 9.04%
Subprime Delinquency Rate May 1997 (before Subprime crisis): 9.67%

This is why no one who buys a house should listen to someone who makes money from underwriting loan products. They don't have your best interest at heart because they make money from your credit servitude, this is how two-bit companies work, they will underwrite any trashy loan product if they can get away with it. They will tell you that FHA loans are great even though they are sub-prime products under another name.

Just because you help put people into credit doom at your daddy's company doesn't mean the loan products you're helping to underwrite aren't bogus subprime garbage.
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