FHA financing seems to be a neglected talking point on the national media stage, says Fred Doleac, Broker/Owner of RE/MAX Country Properties in Amherst, N.H.
Doleac wonders why more industry leaders and real estate agents aren't taking the opportunity to explain the attainability of FHA loans. The loans, which require only a 3.5 percent downpayment and a decent (but not necessarily excellent) credit score, are ideal for qualified, first-time homebuyers who have low or manageable debt-to-income ratios but may not have tons of cash for a conventional-loan down payment.
"All you hear in the news are naysayers telling consumers they won't be approved for a mortgage unless they put 20 percent down and have perfect credit," Doleac says. "But that's simply not true. Unfortunately, the popular perception is that money isn't available and you can't get it right now if you don't meet these astronomical requirements. That's why so many people aren't budging right now."
That's where you, the real estate expert, come in, Doleac says. Real estate agents need to talk about FHA financing every chance they get with prospects, other colleagues and in the local media. Doleac recently appeared on American Public Radio's Marketplace Money program to spread the word, and is frequently featured as a real estate news source in a local paper. His efforts have paid off.
"The buying side is where you'll make your money in the next three years," Doleac says. "First-time buyers are out there, and when they start buying, more move-up buyers can get to their next home. The problem is, though, that most agents don't have sufficient lead generation to find these buyers."
Doleac shares these tips for agents interested in spreading the word about FHA financing:
1. First, educate yourself. Meet with a lender who has a delegated FHA underwriter (not a mortgage broker; a full-service lender). Ask the lender to give you a working knowledge of FHA loans, highlighting the key points you'll need to present to buyers.
2. After getting the facts, include the message in your marketing. Send out blast e-mails, post it on your Web site, put it in flyers or mention it during pop bys. Position FHA financing as a benefit for everyone you come in contact with. Make it part of your everyday real estate dialogue. You have to talk about it.
3. Key talking points for FHA loans:
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The borrower must meet standard FHA credit qualifications (there's no set credit score barometer, but a borrower's debt-to-income ratio is heavily considered).
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The borrower is able to finance the upfront mortgage insurance premium into the loan. The borrower will be responsible for paying an annual premium.
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The FHA mortgage requires a low 3.5-percent down payment, and that money can come from a variety of sources, including parent gifts and HUD downpayment assistance grants.
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Closing costs are also low - typically 3 percent of the total purchase price - and are usually covered by the seller in today's market. They can also be incorporated into monthly payments.
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Eligible properties are one-to-four unit structures, and each state has a purchase price limit (as high as $400,000) for FHA loans.
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If a buyer finds a fixer-upper, the FHA 203(k) program can help the person purchase or refinance the property, with the cost of repairs and improvements included in the loan.
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FHA home mortgages aren't just for first-time homebuyers. FHA refinance loans can help people get out of toxic debt situations caused by subprime mortgages with high interest rates.
4. Have trouble finding those buyer leads? Ask the human resource departments of local companies if you can host a free, brown-bag lunch seminar for first-time homebuyers (in addition to investors and retirees to cover all employee demographics). Focus on FHA financing, but don't forget to mention the $8,000 tax credit and low interest rates too.
5. Once you find first-time buyer clients, sit them down with a lender who specializes in FHA loans to get them pre-approved for FHA financing. They may qualify for a smaller property, like a condo or townhome. Make sure the property (be it a house or a condo located in a covenant-protected community) is FHA friendly; some properties are not eligible for purchase with an FHA loan.
6. Disclose everything and make sure to establish trust and credibility as your buyers go through the FHA financing process. Explain all their options and be realistic with them if their expectations aren't in line with what they qualify for.
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Comments (1)
Why would you not want to talk to a mortgage broker? I am a mortgage broker who owns two RE/MAX franchises. I have been doing FHA loans for 15 years. I think I have a little bit of knowledge about the product.
1. A mortgage broker who is HUD-approved is treated like a lender and their sponsors have FHA underwriters on staff.
2. What makes you think brokers are not full service? I can't begin to tell you how many deals I saved that loan officers at banks screwed up.
3. Underwriters do not take loan applications. They do not structure the loan. The loan officers do (with my company or with a bank). Underwriters ensure they have the documentation to sell the loan to an investor.
4. I deal on the wholesale side with FHA lenders and get better rates than the retail side. Yes, banks are paid a yield spread; it is just built into the rate. Plus, they do not have to disclose it on the HUD, so you never know how much spread the bank is making. You do with brokers, as it is disclosed on the GFE and the HUD.
5. I am not saying banks or their affiliates do not do a good job.( Every few years they try to take over the real estate broker business.)
I agree that FHA is a great product. However, it is the people you deal with who will provide the service, be it a broker or a bank. Most RE/MAX agents know this. However, get all the facts about FHA-approved brokers. Remember, Mr. Doleac, if it were not for our brand, your sign would be reading Fred's Real Estate Co.
- Kim Schieldknecht, RE/MAX Elite and The Clermont Financial Group, Cincinnati, Ohio
