Post by demandypants on May 14, 2012 12:30:03 GMT -5
We sold to an FHA buyer, in a lesser market, but didn't really have much of a hassle considering the difference. They did ask for more in sellers assist. I could see how two like offers - the FHA financed one would perhaps seem less strong due to the lower downpayment. But we didn't have that luxury to choose between two offers either! Good luck!
I think it depends on your local market whether or not this would be an issue.
The area we bought in was/is HOT and houses were/are going quickly. We were in three bidding wars and lost all of them as 10% conventional buyers. Two we lost to full cash and one to 20%. Our house was our third bidding war and we were the back up, but we really lucked out because if we had waited a day to get our offer in we would have had much stiffer competition. If we had been FHA buyers I think it would have been a lot tougher because sellers in the area know they can get conventional and feel like it's less hassle/a better bet that the deal goes through.
If you go into a bidding war, the odds are against you. If houses aren't going like hot cakes in your area, it probably isn't as big of a deal. Are you able to do a 5% conventional? With the fees involved with FHA the cost savings long term is huge if you can swing it.
I'm not sure that I cared that much (we happen to have conventional buyers anyway), but I know our realtor said she will not take any offers from someone considering VA loans because she has been having tons of issues with the appraisals (I think she said out of the last 5 that she did VA loans with, none of them appraised).
We were looking at three loan types - FHA, VA and conventional. My DH doesn't qualify for VA until the fall so we were going to wait until the fall to buy, so when the right house fell into our laps two months ago we had to decide between FHA and conventional. We ended up getting gifted $ from my parents for the downpayment which we didn't expect, we were ready to do at least 5% down no matter what, but that gift allowed us to do 10% down.
The biggest differences cost wise that I saw as a buyer between FHA and conventional (besides the down payment % difference) was the amount of PMI. Our PMI with FHA would have been $400+ per month, but our PMI with conventional is $115 per month. Plus with conventional you can make extra principle payments and get rid of PMI faster, whereas with FHA you have PMI for a minimum of 5 years no matter what.
I think overall if you can do 5% or more down, conventional is the way to go. I think it makes you put more $ down for a more solid offer (which sellers like), there are less inspection restrictions than with FHA, PMI is a fraction of the cost, and you can get rid of the PMI as fast as you can pay down the extra principle to get to 80%.
Post by car.ramrod on May 14, 2012 13:59:19 GMT -5
It was a little less attractive to us when we sold our house because you can go through the inspection period and not have anything to fix but then during the appraisal period the appraiser could demand that items be fixed before the loan is allowed to close. This is very rare with conventional loans but happens all the time with FHA. The not knowing until late in the game whether we would have to put money out for repairs bothered me. We did end up selling to an FHA person but if presented with two offers of the same amount we would have jumped on a conventional over FHA in a heartbeat.
Post by vanillahip on May 15, 2012 11:20:31 GMT -5
We sold my late FIL's house last summer. We had no real knowledge of the home and we absolutely did not want to bother with the FHA inspection process. We ended up with multiple offers (it was priced insanely low so we could be done with it quickly) and went with a slightly lower offer w/ a conventional loan over the higher FHA offer. But the house was 1 hour away, we'd already put money into making it livable and couldn't/ wouldn't invest any more for FHA requirements.
Like some of the pp's said , FHA loans are really strict on inspections, if we had gotten and FHA offer, we likely would have stuck with the conventional offer because of that. As it was, we accepted a conventional offer asking for a small amount of seller assist over a VA loan that wasn't because of issues with VA loan appraisals in our area (and because the conventional was offering 30 days post-closing occupancy for free, the VA would have chanrged rent).
As a seller (whose buyers are going the FHA route) - I can say that if there were two offers on the table, all things "equal" with the offers... and one was FHA loan financing and the other was conventional, I would choose the conventional loan.
So far, the process with our buyers hasn't been bad, BUT.... the appraisal came in 15k lower than our agreed upon price.... and FHA (possibly ANY lender?) will not allow the buyers to buy for more than the house was appraised for.
AND we had repairs we had to do in order for their loan to even approve... meaning in addition to being out the extra 15k we agreed on, we also lost another 1k in "needed" repairs (which weren't even things that bothered the buyers or us... it was the lender).
So as a seller, I would prefer the person with the conventional loan because I (perceive) there to be less hassle. But again, that would have only happened if we had 2 offers sitting side by side. Our buyers were the first to put in an offer and really seemed to love our home, so I'm happy to be working with them, even if it is an FHA loan.
I co-signed my brother's house that was bought using FHA and sold one of our houses to an FHA buyer. Frankly, I don't think it's a big deal - my brother bought a 100 y/old house that had been renovated and it passed inspection just fine- but, all things being equal, obviously I would take an all cash offer over 20% down, and 20% down over 10% down, and so on. So yeah, it's a disadvantage, but it's one you can fix by bidding higher, agreeing to rent backs, etc. You just need a realtor who will figure out how to compensate for it if you are in a bidding contest.