Why is a Conventional loan better to a seller then FHA loan i'm lot with this?

Asked by Lisa, Oakland Ave/Harrison St, Oakland, CA Sat Sep 12, 2009

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Ebosales2, Home Buyer, New York, NY
Mon Apr 24, 2017
We have more than average credit I guess (691/744/706) scores. We want to go conventional loan but we can't seem to save money right now. We probably have about 2k saved but since I get paid once a month our savings starts to get pinched. Should we just go FHA because we don't have 10-20% down? We want to buy a 120k-150k house. Also can't forget about the closing cost. Its a sellers market right now and its tough. Any suggestions?
0 votes
If you're stating your credit scores are 691/744/706, then why did you state in a new question that your Equifax score is 639? I already replied in your new question that it would benefit you to wait and save some money first. You will need to pay mortgage insurance which is a lot of money every month.
Flag Mon Apr 24, 2017
I'm in Dallas, TX by the way.
Flag Mon Apr 24, 2017
Rose Nied SH…, , Oakland, CA
Sat Mar 27, 2010
With an FHA loan the buyer is coming in with usually 3.5 per cent. In a conventional loan the stakes are higher, 10-20 per cent. The buyer has more invested. Also if there is any potential damage that an appraiser might see, it can create problems with the FHA loan. Their standards are much higher....properties must have a stove, refrigerator, working bathrooms, etc. A buyer could get into contract and then down the line have to pull out because of damages, etc on a FHA loan. FHA loans are great if the property is in good condition and unless you have a FHA 203K loan (used for renovations on the property) ou would not be able to use them on homes that needed obvious fixing up. You should have this conversation with your lender and also with your agent. They should take the time to better explain all the nuances of each type of loan and what is best for you and the purchase of the property. Good luck...Rose Nied, Alain Pinel Realtor (510) 530 7011
Web Reference:  http://www.apr.com/rnied
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Lisa Cartola…, Agent, Oakland, CA
Tue Sep 15, 2009
Lisa,

Hi. I think what you are asking is why sellers believe a conventional loan is better than an FHA loan.

The perception is with conventional financing, there is a larger down payment and therefore the buyers are more stable. In reality this is not always the case and I really do think that when looking at offers there is more to vetting a potential buyer.

One of the current advantages to FHA financing is the lender can actually hire appraisers directly. With current rules and regulations for conventional financing the lender has to contact a centralized group that in turn is resonsible for hiring the appraiser. This can lengthen the time it takes to get the apprasial completed and in addition I have seen appraisers from Fairfield hired to evaluate property in Oakland....

If you are looking to purchase a bank owned property, the reality is the asset managers want a deal that is going to be 1) easy 2) close for the highest and best price. Becuase with conventional financing there is a larger downpayment, the thought is that the buyer with more money down will be better able to afford the home and have more "skin in the game". The reality once a loan is funded, it doesn't matter if you put 3% or 50% down if the purchasse price is the same.

When working with your Realtor to submit offers, you may want to make sure your Realtor is able to convey all the positives about your financial situation and you the buyer that they can ,and also have the lender readily availalbe to answer any questions.

Hope this helps!

Lisa Cartolano
Alain Pinel Realtors
Web Reference:  http://www.LisaCartolano.com
0 votes
Antoine Pirs…, Agent, Oakland, CA
Mon Sep 14, 2009
The short answer is: certainty to close is much higher with a conventianal loan. That is what every seller is looking for now.
Yes there are many more detials I could give you, but this is the main reason.
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Pacita Dimac…, Agent, Oakland, CA
Sun Sep 13, 2009
Lisa,

It will also depend on the seller.

If you're looking to buy a bank-owned property, many of the listing instructions say that they are not accepting offers with FHA loan financing. Reasons given are that FHA loans oftentimes take a longer time to close than conventionals loans. FHA also requires two appraisals independent of each other. FHA has more requirements that must be met before a loan is approved.

Many bank-owned properties aren't going to meet FHA rules because such properties are usually stripped of appliances (a working stove is a requirement), and the properties are often vandalized (broken windows, doors) which is why they are boarded up.

For regular sales, it isn't as much of a problem unless the seller wants a fast escrow. No one can really guarantee a fast close.

Good luck!
Web Reference:  http://www.PacitaRealtor.com
0 votes
Krista Miller, Agent, Berkeley, CA
Sat Sep 12, 2009
Lisa,

Great question! And here is the answer: it isn't. FHA has only really made a huge presence in this market over the past year. There are still a lot of agents, including listing agents, who are not familiar with FHA loans and therefore only know what they hear in the media. That is really too bad. Of my last 6 transactions, 5 of them were FHA, and one of them was for a house that sold for $645,000 and had 7 offers on it. In fact, that house closed in 23 days. Yes, an FHA loan that closed in 23 days! My suggestion is when you make an offer, have the mortgage broker pro-actively call the listing agent and ask them their experiences with FHA; if they have none, or their experience is limited, have the mortgage broker explain the process to them. A little education makes all the difference in the world. Because of this I have yet to have my clients lose a house in competition because they were FHA. You can do the same.

Good luck,
Krista
Web Reference:  http://www.kristashouse.com
0 votes
Kamal Randha…, Agent, El Sobrante, CA
Sat Sep 12, 2009
Hi Lisa,

That's a good question and I'm assuming that you wouldnt be asking if you have not already had the experience of conventional offers being picked over yours, am I correct? The reason why conventionals get picked over FHA is really because of the rules FHA loans have regarding their loans. FHA wasn't so bad before but lately, it's gotten VERY strict with lending and on the TYPE of properties they lend. So, rather then deal with an FHA loan which may or may not happen, sellers pick the conventional to be on the safe side. Please make sure you are working with a skilled realtor because they can get your offer accepted in most cases. I hope I answered this question to your satisfaction. Good luck and please feel free to call or email me anytime~

Kamal Randhawa
Broker
510-932-1066
0 votes
The Hagley G…, Agent, Pleasanton, CA
Sat Sep 12, 2009
a higher downpayment for a conventional loan means that loan has a better liklihood of closing due to the stability of the buyer. FHA loans require a lower downpament and are more relaxed on credit scores. Plus....you can usually close escrow faster.

BUT....every situation is differenct...consult your agent on how to effectively position your offer to the listing agent in order to get it accepted.
Web Reference:  http://cindihagley.com
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