Skip to main content

A Case for FHA, Seriously (Posted October 19, 2015)

Before we get into the meat of the subject, let’s review some numbers.  In the Arizona market, here’s how your potential buyers break down by loan type:

•  28% qualify for Conventional loans
•  18% qualify for VA loans

 Doing some simple math, that means that your pool of potential homebuyers who qualify for Conventional and VA loans is 46% of the population.  That’s not necessarily a bad number – there’s an argument to be made for being selective – but if you add FHA buyers to the mix, that’s another 44% of the population.  You’ve practically doubled your pool and can draw from 90% of the population here in Arizona. 

Let’s look at an example of a $271,050 30-year fixed loan with a 680 credit score (average credit score in Arizona is 676):

Conventional (4.5% rate w/1.48% MI):                
Monthly payment is $1,731.70

 FHA (3.75% rate w/.85% MI): 
Monthly payment is $1,469.24               
That’s a difference of $262.46/month!

Why the difference in the rate?  On Conventional loans, when the credit score drops below 700, pricing hits occur.  Remember, the average credit score in Arizona is 676.  Now for the arguments against FHA:

With a Conventional loan, MI eventually falls off; on FHA it doesn’t. 
All true, but home buyers stay in one home for an average of just over six years – the MI won’t fall off in six years on a Conventional loan either.  In those six years, with a savings of $262.46/month with the FHA option, that’s $18,897.12 in overall savings.  That’s some major college fund money!

The loan limit on FHA is $271,050 – I sell houses that are much more expensive. 
No argument here.  That’s where being selective comes into play, of course.  Food for thought, though: the average house price right now in Maricopa and Pima Counties is below that threshold.  Those homes that are selling as fast as you can list them are below that threshold.  You can sell four $250,000 houses in six months or you can try and sell a $1 million house in 12-18 months. 


When your next client comes to you to buy a house, be the expert!  Or just call us – we’ll make you look REALLY good!

Comments

Post a Comment

Popular posts from this blog

An Age-Old Concept Reaping Future Rewards

W hy are social media like Facebook and Instagram so darn popular among real estate and mortgage folks?   Hint: the top reason might be an endless supply of memes, cat videos, and the chance to be snarky, but the other reason runs a VERY CLOSE second.   Give up?   Answer:   They’re free – and they really help even the playing field by enabling a one-person shop look and market like an organization who employs an army of wordsmiths and graphic artists. This new century is glorious, right?   With that in mind, let me re-introduce you to a centuries-old concept that is equally glorious – and can help IMPROVE the playing field for you, regardless of the size of your team: karma.   On the subject of “free”, I’m not suggesting that you work for free, but when you freely give of yourself and your knowledge, you’ll see a greater payoff, I promise! Recently, an agent came to us with a question: she has a client who is looking to sell his condo.   It...
Post a Comment
Read more

Get to the Point (Posted February 29, 2016)

As you may have already noticed, there’s some amateur art included in this week’s newsletter.   While it’s certainly better than a crayon drawing that might grace a refrigerator that’s supposed to be “mommy” but looks more like a B-movie creature, we all acknowledge there’s a reason the guy in our office who drew this . . . i s still working in our office rather than making a living elsewhere.   Be that as it may, there’s a point to the picture: is this how you’re allowing your client to choose their mortgage company?   In many cases, it’s probably not too far off.   Agreed, it’s wise to stay on the right side of the law and be sure you’re never accused of “steering”.   With that in mind, many agents tell their clients that it’s completely their decision as to what mortgage company they use (and it is, of course) and effectively step back from the entire conversation – using the illustration to the left, they’re putting the blindfold ...
Post a Comment
Read more

Bubbles: History or Hysteria?

Whether you’re a flipper of TV channels or a die-hard fan of one particular news source (television, radio, internet, or some weird thing called a newspaper), you can’t help but come across a story or twelve on a semi-regular basis about the housing market and whether we’re on a “bubble”.   There are thos e pundits who claim everything points toward the market being on a bubble and how close we are to it bursting, and there’s an equal number who blow off the idea like that’s the most ridiculous thing they’ve ever heard.   What you don’t hear, though, is actual data supporting their arguments concerning a “bubble” in the housing market because it makes for a better story to watch people wring their hands and make emotional pleas and/or flash artificially whitened and perfectly aligned teeth at the camera and say these end-of-days kooks have it all wrong.   Well, buckle up, kids!   THIS is about to become your favorite news source (at least for the next two or thre...
Post a Comment
Read more