I Love FHA, and so do my clients

May 23, 2008 · Filed Under Lending and Finance 

I love FHA.  I love everything about it.FHA Mortgage love

If I could I’d send FHA a little love note and flowers and take FHA out on a date.  We’d go to the new Churchhill’s steakhouse in town, then head for a nice stroll along Riverfront Park.  I hope my wife doesn’t mind, I’ve invited FHA to move in with us.

FHA-insured mortgages have been the saving grace in an otherwise bloodied lending landscape.  My clients have benefited immensely from FHA-insured mortgages.  Just this week a client of mine, about to close on a house using an FHA mortgage, wrote to me and said “Thankyou for all the small but significant things you do for us besides the big things… helping us with our investment planning (two homes)…” 

See if this scenario works for you…

The Scenario:

  • My clients’ credit score is marginal, right around 600
  • They only have about $2,000 in savings
  • My clients own a beautiful home in Spokane in a neighborhood they aren’t particularly fond of
  • They are do-it-yourselfers, hooked on DIY-network and have done about all they can to their current home, it is absolutely darling
  • They’d like to move into and rehab a similar-sized home around Corbin Park, a neighborhood they’ve been eyeing for a few years
  • Although they don’t like their neighborhood, my analysis shows their neighborhood will appreciate at an above average rate due to certain coming, positive changes in the neighborhood
Bedroom of current home - GORGEOUS,
and soon to be a rental


The Solution: Turn their current home into a rental, purchase and move to the Corbin Park home

  • My team pre-approved them for an FHA mortgage, and we got them a wonderful Corbin Park house under contract
  • I photographed and built them a website to post their current home for rent (to protect my clients’ privacy, I haven’t linked to their website)
  • I taught them how to create Craigslist postings to drive traffice to their site
  • I set them up with a rental application form and prefilled rental agreements and instructions on how to find a tenant

Why FHA:

  • With their low credit score, they’d be paying about 1/2 % higher mortgage rate if they took a conventional mortgage instead of FHA.  FHA doesn’t penalize low credit scores nearly as harshly as conventional financing does
  • MUCH lower PMI payment than conventional, keeping their monthly payment affordable
  • They put 3% down, which came as a gift from the seller through Ameridream.  Their out-of-pocket downpayment: $0
  • The seller paid most of their loan closing costs, they only need to bring about $700 out of pocket
  • Its a 30-year fixed loan, not a nasty ARM.  They can sleep easy at night since their loan payment will never increase

Now what is REALLY slick about FHA is…

  • One of the buyers lost their job 2-weeks before closing.  They had 2 relatives lined up to co-sign for them.  FHA is very lenient on allowing co-signers
  • The buyer took another job, in a different line of work, just a few days after losing their first job.  FHA didn’t have a problem with this.  They decided not to use a co-signer and we will close after negotiating a short contract extension with the seller

 
This isn’t a fluke! With FHA, we can handle situations like this day in and day out…

Thanks,

Aaron

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Comments

2 Responses to “I Love FHA, and so do my clients”

  1. Tobias Jones on May 26th, 2008 8:56 pm

    I am enjoying your website. The lay out is good, the information fair so far and I don’t think you have said “now is a great time to buy” anywhere yet.

    FHA wondeful thing that it is is changing their pricing model on May 31st. It may be a bit more expensive for some clients in the future.

    http://www.latimes.com/business/la-re-harney18-2008may18,0,4051644.story

  2. Aaron Mallo from TheSpokaneDirt.com on May 26th, 2008 9:47 pm

    Thanks for the comment, I really appreciate the feedback. I’m new to blogging and am really enjoying it, this is a great outlet for providing value to others through personal accounts and stories of what I see and experience in the world.

    The FHA insurance pricing model overhaul is, I believe, long overdue. Don’t get me wrong, I enjoyed the simplicity of the model, and the existing model proved QUITE attractive to my clients with low credit scores. My read on the new model is it isn’t too extreme, higher upfront mortgage insurance (which most clients finance anyway), and a VERY slightly higher monthly cost for lower FICO scores. Not too bad, really.

    On the mortgage side, we got flipped on our heads in early March when the Mortgage Insurance companies threw us a paradigm shift in their guidelines, I believe this next week ushers another minor shift as well in credit risk assesment with the rollout of Fannie Mae’s DU 7.0

    And, I loathe the catch phrases and glossiness sometimes found within the real estate industry. I speak from the heart, I put my pants on one leg at a time just like anybody else, and I enjoy sharing my experiences and education that have come with my career choice in real estate and mortgages (actually, it is a calling, ‘a career choice’ is really an understatement).

    You’ll never hear me say “now is a great time to buy”. It is only a great time to buy if it is right for your personal situation, regardless of the market. Same goes for selling. Reality is, it is only a great time to make a buy or sell decision a few times during anyone’s lifetime… and it is quite an honor to be able to help a client make wise and prudent decisions throughout the process.

    Thanks,

    Aaron