topic Re: No luck finding FHA approved home in Mortgage Loans

No luck finding FHA approved home

sueblue34 — Wed, 10 Nov 2021 21:43:12 GMT

Hi everyone,

I finally got preapproval for an FHA loan for $402k. This will be my first home and I currently live in South Florida. My problem is that I've put in multiple offers on homes only to be outbid or flat out overlooked due to cash offers or conventional loans. Even at 402k, sellers are receiving offers above 420k. The housing market is Miami is extremely competitive and my current rent is 2x more than what my mortgage would be so I need to get moving. Right now I can only offer the 3.5 percent down. Is anyone else experiencing the same issues? Any suggestions or how I should proceed?

Re: No luck finding FHA approved home

ShanetheMortgageMan — Wed, 10 Nov 2021 21:50:56 GMT

Since properties are selling for so much higher than their list price, you may need to start looking at homes at a lower price point since you know they will be bid up. So if you are looking at homes for $400k and they are getting bid up to $440k, then start looking at around $360k.

It's also a good idea to have your loan officer reach out to every listing agent on offers you make, makes you a little more memorable in the eyes of the seller plus the listing agent will appreciate the communication.

One part a seller may be reluctant about is the down payment, because if you agree to a price of $402k but the home only appraises for $390k and the seller doesn't want to come down, then you need to come in with the $12k difference + the 3.5% down payment on the $390k sales price. Someone who is planning on putting 20% down could still get a loan in that situation, because they were already putting more than the minimum down (3-5% with conventional financing).

Re: No luck finding FHA approved home

iced — Wed, 10 Nov 2021 22:22:59 GMT

The above is a great place to start.

Also keep in mind that in a seller's market, FHA loans are among the least enticing offers to receive as a seller because they will have contingencies (around financing, inspections, and other FHA requirements) that cash/conventional loans don't have to have. In such markets, the best way for a FHA to stand out is to be the highest bidder by an amount worth taking the risk with contingencies on. This may unfortunately further push the asking price you should be targeting down further. If two offers come in within a few thousand of each other, where one is a 20% down conventional (or cash) with no contingencies and the other is a FHA with 3.5% down and contingencies, the FHA will lose nearly every time. Your best bet to standing out in such cases is coming in enough above other bids that the seller is ok taking the chance on your contingencies not falling through.

This is also problematic for the other reason mentioned above -- if you bid too high and the appraisal doesn't align, you can also lose financing if you can't produce the additional down.

Re: No luck finding FHA approved home

4sallypat — Wed, 10 Nov 2021 23:30:10 GMT

I know that feeling!

We have been searching for single family houses and putting in offers at the height of the craziness (spring - summer) where offers were accepted at 10-15% over asking.

This fall, the market shifted a bit in our favor.

We were able to finally get our offer accepted but had to waive all contingencies: inspection, appraisal, repairs, termite, etc...

We got the house for 5% over asking which is a miracle in Southern California.

What we did is due to the overbidding price wars, we downgraded our price range about 10% lower than what we were looking at.

This made our offers at our budget when we had to overbid.

By knowing the comps in the area, we felt comfortable with waiving appraisal and the actual appraisal just came in at our offer price.

We are closing our first house on a conventional 5% down loan in 2 weeks.

Re: No luck finding FHA approved home

Anonymous — Fri, 12 Nov 2021 05:48:43 GMT

It's hard but not impossible! Some of the houses I went to see were in the market for less than 72 hours and already had an accepted offer... especially in popular areas.

I'm closing my 3/2 single-family home next week in the West Kendall area (Miami) with an FHA offer. House was listed for 415k and I offered 10K over appraisal not to exceed the asking price and I got it! Took a few tries but patience paid off.

Also, I was approved for 400k initially, but since the house I'm buying has no HOA, I spoke to my loan officer and he approved the raise to 415k. House was appraised at 408k, so I only had to put $7k extra.

Can't wait to finally close next week!

Re: No luck finding FHA approved home

sueblue34 — Fri, 12 Nov 2021 17:26:03 GMT

I will reach out to my LO. Its hard to come down to 360K with out ending up in a risque neighborhood. I may need to work on a higher down payment or consider waiting. TY

Re: No luck finding FHA approved home

sueblue34 — Fri, 12 Nov 2021 17:30:46 GMT

Thats awesome congrats!!

In the Miramar/ Pines ares prices start at 350K. Any lower are looking for all cash offers. I am working with my LO to see how I can get approved for a higher limit. TY

Re: No luck finding FHA approved home

jmw1 — Sat, 13 Nov 2021 23:04:24 GMT

Any way you can double the amount of cash available from $14k to $28k? Sellers are going to be spooked by your inability to bridge an appraisal gap. Maybe you have a retirement account where 60% of the value can be withdrawn and pray the appraisal comes in good so you don't have to break the piggy bank.

Re: No luck finding FHA approved home

FLLGuy — Sun, 14 Nov 2021 16:39:10 GMT

@sueblue34 - I just sold my house about 2 weeks ago in Davie, Florida and have been working on new construction in Port Saint Lucie since Feb 2021. You can get more bang for your buck (in my own opinion) if you look up north in Broward, West Palm Beach counties unless you're restricted due to your job staying in Miami-Dade. However, as everyone else posted unless you have a substantial amount of CASH then more options will open. You may still find a few affordable options in Miami and Fort Lauderdale below $500K but they may require some work to be done, at least that's been our experience. We even tried Hialeah to no resolve - prices are too high. Maybe Homestead is an option for you, I've seen some new construction come on in the last 30days come online.

FHA Limits in Miami-Dade are $402K for single family homes according to HUD (FHA HUD Limits 2021 ). You could get more if you're open to a nice duplex in Sweetwater, Westchester or other Miami areas. Keep in mind this can change for 2022 by how much (unknown at this time). For me in PSL my FHA limit is $385K - anything above that I have to cover out of pocket. Most builders in Port Saint Lucie to my surprise accept FHA loans.

However, we set our eyes in Port Saint Lucie as homes are still affordable. Just my $.02.

Re: No luck finding FHA approved home

sueblue34 — Tue, 16 Nov 2021 16:55:59 GMT

yes I was approved for fha at the max limit so anything more I would have to cover. Right now I'm unable to add additional funds upfront which is killing me because of my sky high rent. I may have to result a fixer upper.

Re: No luck finding FHA approved home

jmw1 — Tue, 16 Nov 2021 23:13:58 GMT

@sueblue34 wrote:
yes I was approved for fha at the max limit so anything more I would have to cover. Right now I'm unable to add additional funds upfront which is killing me because of my sky high rent. I may have to result a fixer upper.

FHA requires a move-in ready home. They won't accept a fixer upper because you need many thousands of dollars in reserve to fix it and your down payment is already too small. Fixer uppers are for those with a lot of cash reserves.

Re: No luck finding FHA approved home

ShanetheMortgageMan — Tue, 16 Nov 2021 23:17:57 GMT

@jmw1 wrote:
@sueblue34 wrote:
yes I was approved for fha at the max limit so anything more I would have to cover. Right now I'm unable to add additional funds upfront which is killing me because of my sky high rent. I may have to result a fixer upper.
FHA requires a move-in ready home. They won't accept a fixer upper because you need many thousands of dollars in reserve to fix it and your down payment is already too small. Fixer uppers are for those with a lot of cash reserves.

FHA has a rehab program called the FHA 203(k) loan which can finance needed repairs in order to bring it up to FHA's minimum property requirements. It's a great program and opens the doors to those types of homes which typically have less buyers interested in them (increases the chances of a seller accepted your offer).

Re: No luck finding FHA approved home

sueblue34 — Fri, 19 Nov 2021 02:37:37 GMT

I will look into this. Thx!

Re: No luck finding FHA approved home

Itgem679 — Sat, 20 Nov 2021 17:23:31 GMT

Portland Or here. While I'm not sure what advice I can offer, I can definitely commiserate with you. I received an FHA approval for $270k - most, if not all, homes are priced at 295K and up here in Portland. I have been told every house is either cash-only, has a cash offer, or the sellers won't pay for closing costs. It's really frustrating. My pre-approval would increase to $350k if I didn't have a 5-year-old repo that I can't seem to get removed. Even then, seems as though Cash Is King. I'd love to meet the people who CAN afford to do this.

At this point, for myself, I'm just saving (more) money and trying to fight the repo. I'm hoping if I can bring more to the table, I can find something. Also, I have heard shopping with more than one Mortgage lender is advised to help you get the best rate and pre-approval.

Re: No luck finding FHA approved home

toi34 — Sat, 20 Nov 2021 20:33:32 GMT

San Francisco, Bay Area here -- here's another strategy you could try:

My friend is moving into his home near Silicon Valley as I type and he was FHA. I don't have to tell how CRAZY upon crazy the market is up here, but his agent suggested he meet the sellers in person, and that way he could tell his story and build a rappor with them. It worked! They accepted his offer over ALL the numerous cash buyers who were willing to waive all contingencies. He put 3.5% down, the house came-in appraised at asking price, and like I mentioned, he's moving in today!

So try that and see if it works. ♥

Re: No luck finding FHA approved home

jmw1 — Sun, 21 Nov 2021 02:37:14 GMT

@ShanetheMortgageMan wrote:
@jmw1 wrote:
@sueblue34 wrote:
yes I was approved for fha at the max limit so anything more I would have to cover. Right now I'm unable to add additional funds upfront which is killing me because of my sky high rent. I may have to result a fixer upper.
FHA requires a move-in ready home. They won't accept a fixer upper because you need many thousands of dollars in reserve to fix it and your down payment is already too small. Fixer uppers are for those with a lot of cash reserves.

FHA has a rehab program called the FHA 203(k) loan which can finance needed repairs in order to bring it up to FHA's minimum property requirements. It's a great program and opens the doors to those types of homes which typically have less buyers interested in them (increases the chances of a seller accepted your offer).

203k/203b loans on fixer uppers have a lot of downsides too. 203k/203b loans have much higher interest rate than regular FHA loans. Contractors are hard and expensive to find now and you will have lots of delays which may threaten the FHA deadline to finish your renovation. 203b gives you a tiny $5k repair fund while the 203k is a $35k repair fund. $35k doesn't get you very far in 2021/2022 if the house needs moderate TLC or more. The fixer upper house could be a real money pit if additional problems are found and the $35k isn't enough and then you'll wish you were still renting an apartment where the landlord pays for every repair.

Re: No luck finding FHA approved home

Anonymous — Wed, 24 Nov 2021 19:27:45 GMT

Consider your situation a blessing. Don't EVER get into a "bidding war" for an asset that can go up or down. Let these morons bid against each other and pay 25, 50, 75K more for a house then they should have. Just keep renting if possible for a bit. The market, any market, including housing, will fall eventually and you'll be there to pick up the pieces form some clown who paid WAY too much for his house. Keep putting in bids and for everyone you get turned down on, thank your lucky stars. You'll find the right one. I did. Just takes patience. Every offer I wrote, I wrote for the asking, IF the house was worth it, and gave the seller 24 hours to respond. Patience paid off. In a house that appraised over the asking and the loan was closed in under 30 days. Right now you are simply feeling the pressure of "missing out". Do teh exact opposite of what your brain is telling you to do. Best wishes my friend.

Re: No luck finding FHA approved home

iced — Wed, 24 Nov 2021 20:42:10 GMT

@Anonymous wrote:
Consider your situation a blessing. Don't EVER get into a "bidding war" for an asset that can go up or down. Let these morons bid against each other and pay 25, 50, 75K more for a house then they should have. Just keep renting if possible for a bit. The market, any market, including housing, will fall eventually and you'll be there to pick up the pieces form some clown who paid WAY too much for his house. Keep putting in bids and for everyone you get turned down on, thank your lucky stars. You'll find the right one. I did. Just takes patience. Every offer I wrote, I wrote for the asking, IF the house was worth it, and gave the seller 24 hours to respond. Patience paid off. In a house that appraised over the asking and the loan was closed in under 30 days. Right now you are simply feeling the pressure of "missing out". Do teh exact opposite of what your brain is telling you to do. Best wishes my friend.

A common tactic around here is to intentionally underlist a condo or home's asking price to draw in additional attention. You'll see a place with comps in the $1.3 or $1.4 million range with an asking price of $1.1 or even $999k because 50 people now think they can maybe snag a bargain. Enough who know the FMV bid and it ends up selling for $1.3 to $1.4 million -- several hundred thousand above asking. If someone sticks to asking price or some laughable amount like $25k over, they've got no shot at these places.

More success is going to be found going in with knowledge of the comps and and FMV of the property and putting in an offer based on those numbers instead.

Re: No luck finding FHA approved home

sueblue34 — Tue, 15 Feb 2022 23:31:07 GMT

I just wanted to post an update that I finally found a home an successfully closed on 2/9!!!!

It was a FSBO at 345k but I offered 355k and ended up getting a sellers credit of 13k towards closing due to repairs from the home Inspections. It is a 4/2 with and additional in law Suite

I'm so relieved my search is over. Thank you

Re: No luck finding FHA approved home

FLLGuy — Wed, 16 Feb 2022 00:58:09 GMT

@sueblue34 wrote:
I just wanted to post an update that I finally found a home an successfully closed on 2/9!!!!

It was a FSBO at 345k but I offered 355k and ended up getting a sellers credit of 13k towards closing due to repairs from the home Inspections. It is a 4/2 with and additional in law Suite

I'm so relieved my search is over. Thank you

WOOOOHOOOOO!!!!! Bang! Bang! Bang! Your persistence paid off. What part of Miami-Dade?