Can You Afford to Say No to FHA 203K Borrowers?

Posted on January 31st, 2013

Can You Afford to Say No to FHA 203K Borrowers?

Can You Afford to Say No to FHA 203K Borrowers?

It's no secret that a lot of real estate agents actively discourage interested buyers from getting financing through the FHA. There are a number of reasons for this, but the most common is the fact that these agents believe that it takes substantially longer to process FHA financing that it does a traditional mortgage. Additionally, the Federal Housing Administration requires buyers to jump through a lot more hoops than they would have to if they got a conventional loan from their local bank.

With some of the toughest housing markets that we have seen in almost a century, it is well worth it for real estate agents to take a second look at clients who are interested in FHA financing. In fact, an agent may not be able to afford to say no to these types of clients.

One of the first things to consider is the fact that the FHA itself has changed considerably over the last few years, largely in response to the difficulties that exist in the housing market. In order to encourage homeownership and reduce the numbers of foreclosed homes that are sitting on the market, the FHA has introduced some very attractive loan options to individuals who are purchasing their first home or who are looking for property that they can renovate and repair in order to make it the perfect home.

As banks have added more restrictions to who they will provide mortgages to, the typical home loan process has become more complicated and takes considerably longer than it did a few years ago. At the same time, the FHA has streamlined the process which means that it is no longer true that an FHA backed loan will take a lot longer to process than a traditional mortgage. In fact, they generally take about the same amount of time in most situations.

Another thing to consider is the fact that any real estate agent who turns away buyers who are planning on financing through the FHA may find themselves with a drastically reduced number of clients. The fact of the matter is that a lot of interested buyers out there simply do not have the credit to qualify for a typical bank loan. For these individuals, the only option available to them is to use one of the programs available through the FHA.

Because the average real estate agent probably has a number of properties that they are trying to sell that need everything from minor repairs to major renovations, they should seriously consider taking on clients who are interested in a 203K loan. This type of loan allows an interested buyer to borrow enough money to cover the purchase price of the property and make repairs or renovations to it as well, all with a single loan. Because this type of loan is designed specifically to encourage individuals to purchase homes that they otherwise might have avoided, it allows real estate agents to move a lot more property than they would if they were dealing only with individuals who were interested in purchasing the perfect home at the perfect price.

Another reason that the 203K loan program is so popular is that it requires a dramatically lower down payment and is available to individuals with lower credit scores than what is required for a typical home mortgage. In fact, buyers with a FICO score of as low as 620 can qualify for this type of loan and only need to put down a down payment of 3.5%. This opens up the possibility of homeownership to an entirely new group of buyers who might not have been able to afford a 10%, or even 20%, down payment.

Finally, there is the fact that the FHA has made some very impressive changes to the way that they finance condos. While these types of properties might not have qualified for FHA loans in the past, rules have been changed specifically to accommodate these properties, opening up an entirely new market for both buyers and real estate agents.

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