JoAnn, It is sad to see so many stating FHA buyers have no prayer! I close FHA loans every bit as quickly as Conventional loans, have not had any appraisal issues and the underwriting criteria is far more flexible. I do work with agents who are having some success with getting offers accepted....even in the Bay Area. It seems FHA still has a bad rap...and, for the most part, it is undeserved.
That said, I am trying to flip my clients to Conventional loans. It has nothing to do with their purchase power and everything to do with saving them money. The combination of the upfront MIP at 1.75% and monthly mortgage insurance at 1.25%....and going to 1.35% shortly...just make it a no-brainer to go Conventional if at all possible. The private mortgage insurance is easily 30 - 50% less than FHA.
Topping that off, in April the monthly mortgagae insurance on FHA become permanent for the life of the loan. Essentially, every home buyer using FHA should be looking at an exit strategy to get into Conventional financing asap.
All my best,