No luck finding FHA approved home

[sueblue34]

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?

[ShanetheMortgageMan]

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).

[iced]

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.

[4sallypat]

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.

[Anonymous]

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! 

[sueblue34]

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

[sueblue34]

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

[jmw1]

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.

[FLLGuy]

@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.

[sueblue34]

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.