Our seller’s market leaves people behind. With homes selling beyond demand across the country, despite solid pre-qualification, their offers are turned down simply because of the program they are using to a whole group of borrowers. These borrowers, many of whom are first time homebuyers, have few options and require the dedicated service of Mortgage professionals to accept an offer.
These struggling borrowers use it FHA Programs. According to Yury Shraybman (pictured), a broker at Innovative Mortgage Brokers in Philadelphia, FHA borrowers are severely disadvantaged in today’s market. He attributes this in part to their slightly lower credit scores and the likelihood of having fewer assets than their conventionally skilled counterparts, but also to some stigma among sellers and sales agents when they see deals with an FHA pre -In receive letters of approval. To counter this stigma, Shraybman, whose pipeline is around 30% FHA loan, relies on its own diligence to accept its customers’ offers.
“The idea that they are not qualified borrowers,” Shraybman said when asked what the potentially unfair stigma FHA borrowers face. “Most of the time, they are just as qualified as a traditional borrower, they are just qualifying for a different program. Many people think that an FHA borrower has a lower credit score, but those scores are still workable within the program. For example, the FHA lenders I work with have a minimum loan value of 620. “
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However, he accepted that FHA borrowers do not have the accreditation associated with an automated conventional loan underwriting process, even if the credit score is similar to that of a conventional borrower. He explained that looking at credit, DTI, and other underlying factors will show that a conventional borrower is an overall stronger borrower, but the FHA program is specifically designed to make the home affordable for that disadvantaged buyer. The problem now is that in the face of the tense market, sellers can see where their prejudices and market factors might lead.
A major hurdle FHA borrowers now face is the valuation gap that arises when a home sells for more than its estimated value, according to Shraybman. In one (n FHA loansThe valuation is tied to the property rather than the individual. If an FHA borrower receives a rating and then withdraws from the deal, the seller is stuck and tries to outsource the home with an obvious rating gap. This is not an uncommon scenario as FHA borrowers often have fewer assets and may not be able to fill the valuation gap that is usually paid out of pocket.
Despite these challenges, Shraybman works closely with FHA borrowers and still encourages many on the lower end of the conventional qualification to try an FHA program. He informs them of the challenges and how today’s seller market has exacerbated the difficulties they may face. In this early educational process, Shraybman makes sure his borrowers know he is going against the wall for them and is committed to their offer.
One of Shraybman’s services, he said, is a conversation with the seller’s representative. He asks his borrowers to put him through to the listing agent so he can talk to them about the strength of the borrower. He can explain why they might be better qualified through an FHA loan and why their underlying picture is stronger than the big letters FHA might imply.
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Shraybman attributes some of the stigma associated with FHA loans and borrowers to the sheer volume of call center mortgages out there. He sees many customers with pre-approvals, both conventional and FHA, from a call center LO with a year of experience. He knows these loans are going to fall apart and everyone in his months has a bitter taste about the borrower and the program he has been using. Shraybman’s approach is to be as diligent as possible with his borrowers, explaining exactly what they are qualified to do and what they can afford based on a range of numbers beyond their creditworthiness. He looks at bank statements, W-2, and pay slips to get a complete picture of the borrower. It’s a time and labor approach, but Shraybman believes that other mortgage professionals who want to help FHA borrowers in a tight market have to work just as hard and stand up for their clients.
“I think vendors and their agents should view FHA pre-qualifications the same way they would traditional pre-qualifications,” said Shraybman. “You should do a little more care and contact the loan officer to find out the qualifications of this borrower. Instead of listening to these scars, I use facts about the borrower. I think real estate agents should exercise some diligence on loan officers too. You should make sure this is serious and not a pre-qualification put together on the fly to add volume to the pipeline. ”