What can i request to feel confident that the buyer is qualified? I am nervous about a 3 1/2 percent down FHA loan and don't feel it is a strong

Asked by DKoz, Newbury Park, CA Sun May 20, 2012

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John Sacktig, Agent, New Jersey, NJ
Sun May 20, 2012
FHA is a great loan right now.

A buyer that is qualified for an FHA loan is a good buyer. But, YOUR HOME needs to be in good shape and appraise. if the house does not appraise, probably not going to ge the buyer to kick in funds. So, you better be priced correctly.

Do some due diligence and learn about FHA loans, qualifications and you should better. 3.5 % down in todays world is good.
1 vote
Deborah Madey, Agent, Brick, NJ
Sun May 20, 2012

I wouldn't be nervous solely based upon an FHA loan or low down. The current climate in lending focuses on documented employment with history.

While you have the right to ask for a credit report, you might also be giving a buyer a signal that you will be difficult to deal with. Few buyers are going to feel comfortable sharing their data, and especially if the practice is uncommon.

Whether the preapproval is for an FHA or conventional, either way.........the buyer could be denied their loan. There are plenty of people with 20% down that lack sufficiency in documentation who fail to qualify. As a reactive society, our lenders are now concerned with documentation in this post bubble world.

Is the property that you are selling in good condition? Is it a condo? FHA will require a property inspection in addition to the buyer meeting the lending qualifications. Many condos are currently not FHA qualified.

Assuming your property will meet FHA guidelines, here is my suggestion. Ask you agent to phone the loan officer who wrote the preapproval. That loan officer cannot disclose confidential info, but a conversation with him/her may give good insight. Your agent can ask if the buyers have submitted documentation in it's entirety or only partially. A good question to ask is if the preapproval based only upon a phone call and credit report? If your confidence is lacking at that point, what can be done to solidify it? i.e. Maybe the buyers can submit their docs? If the buyer's lender is working to help the buyer secure the contract, the lender will guide their buyer to submit docs, etc.

There's never a guarantee that a loan will be approved, and it's very rare that we see a mortgage contingency waived. Rely upon your agent for some due diligence with the loan officer....but don't lose the sale solely on the fact it's an FHA loan. There are hundreds and hundreds of those that are making it to the closing table right now.
1 vote
Ian A. Wolf, Agent, Morristown, NJ
Sun May 20, 2012
I would treat the buyer as if they were a tenant and ask to see a credit report and explanation of job history and income. It is within your rights to ask, however, it is also within the buyer's rights to not provide it. Talking to the lender can be helpful also to get your concerns addressed. Understand that FHA doesn't mean that someone isn't qualified, it just may mean they do not have a lot of money to put down or they do not want to put a lot of money down. It is up to you at the end of the day, but if their credit/income is satisfactory to you, then the buyer is probable a good one.

Hope that helps.
1 vote
Pete Maimone, Agent, North Brunswick, NJ
Sun May 20, 2012

Deborah's answer is dead on. we sell plenty of homes under FHA 3.5% down. and some times they are more easily approved than a conventional loan that is less than 20% down under varying circumstances. the reason for this is that lenders are more lenient on credit scores as long as the buyer has strong documentation to support his income. Plus they know that as long as the buyer meets the criteria for FHA loans they are insured by the government via HUD.

the only thing that you may need to be concerned with that hasn't been addressed here in the responses is that if your home is a "condominium ownership" home. In that case your community must be approved via HUD agency. and not recently a expired or expiring soon approval for FHA lending guidelines. your agent or the buyers lender can quickly find out online the statues of any such approval. If your complex is not currently approved many lenders will take the steps necessary in getting that specific community back on the approved list during loan processing time. And still get you closed. although that process may delay closing time. If the community is already approved or you live in single family home or a "planned unit development" (your agent or lender should know this as well or can easily find out) you really have nothing to fear.

hope this helps! and best of luck!
0 votes
Guy Gimenez, Agent, Austin, TX
Sun May 20, 2012
I know exactly how you feel. I always try to stay away from FHA buyers when possible. While some are qualified buyers, many are "marginal" buyers who are a half step away from losing their loan approval. And FHA appraisers are often extremely picky regarding seller paid repairs. Lender letters are seldom worth the paper they're written on since the lender can always rescind the approval and walk away without any penalty and leaving you high and dry.

Bottom line is this. If the buyer feels confident they can get the loan, get additional earnest money and simply hope for the best
0 votes
Last year 2 of my FHA closings closed 10-15K higher than all other offers on the table for the sellers. both had us all concerned about appraisal issues. None of which ever materialized. In the end everyone was happy :)
Flag Sun May 20, 2012
but even 20% down deals go by the wayside as well. Last year I had a deal where Chase bank rescinded their full mortgage commitment 2 days prior to closing scheduled. their commitment conditioned for certain things to be provided prior to fully clearing the loan to close. They rescinded the commitment due to the buyers work visa status, and get this the buyer was a Chase employee here on a work visa who had been working here for them for 3 years. We eventually got the deal closed 2 weeks later by switching to a lender who accepted the buyers work visa... My point here is two fold... any deal can go south. there's risk all down the road up until closing on any deal. But nothing replaces diligence, persistence and knowledge on the part of the agents involved as well as all other interested parties in a transaction.

I look at FHA and VA deals as an additional opportunity to get a home sold and at the highest price to a buyer.
Flag Sun May 20, 2012
Guy, that's not always the case. There are many buyers out there who are very well qualified and simply go the FHA route so they don't put much money at risk because they fear in the back of their minds the horror stories of those who lost 20% or more during the downturn. Many still fear that the ,market could go lower and don't want to risk their hard earned money should the market dip again or in some areas drop further. Even though many in our industry don't believe this will happen. buyers perceptions are reality in their minds. Also as for repairs I've only had one instance where an appraiser required repairs last year (exterior touch up painting) and they didn't care who did the repair the buyer or the seller just as long as the work was completed prior to closing. In over 20years of doing FHA & Va deals I've never not had a property close due to FHA required repairs. Last year more than 50% of my closed sales were FHA 3.5% down loans.
As for lender pre-approval letters I agree
Flag Sun May 20, 2012
Taj Weldon, Agent, Tracy, CA
Sun May 20, 2012
Hi Dkoz,
Your agent knows how to test the quality of an offer.

Having FHA does not make the potential buyer unqualified but conventional is preferred.

Don't ask for a prequalifying letter.Ask for a pre approval letter.
In this area pre approval letters are stronger and means that there credit has been reviewed.

Also call the lender or have your agent call and ask questions.

You can also ask for a pre approval that includes the buyers FICO.

I hope that helps.
Home selling is not something that you should go unassisted.

If you need local Realtor representation don't hesitate to call.

Taj Weldon
DRE 01816152
Web Reference:  http://Www.tajcanhelp.com
0 votes

Unfortunately not all agents know how to test the quality of an offer/potential.... hopefully his does :)
Flag Sun May 20, 2012
Fred Yancy, Agent, Woodstock, GA
Sun May 20, 2012
Ask for the buyer to provide a pre-qualification letter from their lender.
0 votes

As I've pointed out above. And others as well have, prequal and even pre-approval with conditions attached whether FHA or 20% or more down doesn't always guarantee your deal will close. But a word of advice from a veteran agent as well as many on here will agree....... 1st offers are generally your best offer. in today's market.....length of time on the market is more of an enemy than you think as opposed to being well priced and good offers coming quickly....most buyers will offer less after 30 days on the market or months. .... than they will for a well priced fresh on the market home. Any experienced agent will tell you that... also well priced is what the buyer believes not necessarily what a seller or even sometimes their agent believes.
Flag Sun May 20, 2012
okay, i was going to ask for that, but wanted more. First offer on a well-priced house, with no rush to move.
Flag Sun May 20, 2012
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