BY ANNA & MICHELLE
With multiple offers the norm on many listings these days, the seller relies on their listing agent to help them determine which one to accept. In some cases, offers subject to FHA or VA mortgages tend to move to the bottom of the list.
Some sellers consider all cash offers first, and then conventional offers with at least 20% down payments as the next most likely to close. It may be because of a common misconception that FHA or VA buyers are poor credit risks and have a higher likelihood of not being approved. Both FHA and VA do not require as strict credit requirements as conventional loans, but if a buyer has been preapproved, that should alleviate that worry.
A legitimate concern regarding FHA and VA contracts could be that if the appraisal doesn’t come in at the sales price, the buyer has an option to void the contract. This means that the property would have to go back on the market and valuable time could be lost. However, that could also be true for a conventional mortgage.
One major advantage for buyers using these government-insured or -guaranteed loans is that a lower down payment is required. Just because buyers prefer not to put 20% down payment does not mean that they are not credit worthy. In the case of veterans, the VA loan is a perk for serving their country that provides one of the lowest cost mortgages available.
For FHA buyers wanting a low-down-payment option, the mortgage insurance could be considerably less expensive than on a conventional loan. Conventional loans usually want a 740-credit score for the best rate and lowest mortgage insurance. As the credit score gets lower on conventional loans, the price for mortgage insurance goes up. This is not true with FHA; the price is the same on any acceptable mortgage.
For buyers to increase the odds of getting their contract considered seriously or even accepted, the first step is to identify a mortgage professional who specializes in FHA and VA loans and get pre-approved before starting to look at homes. Another option is to attach the pre-approval letter to the offer when it is made along with the contact information of the loan officer.
Have the mortgage professional personally call the listing agent as soon as the offer is made so they can go to bat for you and provide verified information that can be communicated with the seller. Some agents have a predetermined idea that all FHA and VA loans are difficult and fraught with problems. The mortgage officer—who specializes in these types of mortgages—can give the listing agent factual information about the way the loans work in today’s market.
For the buyers who have the resources, another tactic may be to let the seller know that your first preference is to use an FHA or VA loan, but if during the approval process a snag develops, making it not possible, you would be willing to go with a conventional loan.
There are real estate agents who have never participated in an FHA or VA loan and there are agents who specialize in them and have lots of experience. It is to your advantage to be working with an experienced agent. They are going to be the agent who recommends a mortgage professional, writes your offer, presents it to the listing agent, and works with all the other professionals to get your FHA or
VA transaction to settlement.
