With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is
Buyers with good credit can purchase homes with a relatively small down payment, lower monthly mortgage, and low-interest rates compared to conventional mortgages through loans insured by the Federal Housing Administration (FHA). In fact, the FHA only requires as little as a 3.5 percent down payment, which makes it so popular and appealing to first-time home buyers.
The FHA insures mortgage loans for about 30 percent of today's home buyers so there is a good chance you will get an offer from an FHA buyer for your home. If your property doesn’t meet FHA requirements, you could cut out almost one-third of your potential buyers.
Here are five ways you can make sure your home is FHA-friendly to increase your chances of selling:
The FHA lending limit is the maximum loan amount the FHA will insure. These loan limits are updated annually and are influenced by the conventional loan limits set by Fannie Mae and Freddie Mac. These numbers can vary based on home prices in different markets and the type of home being purchased.
The FHA's national low-cost area mortgage limits for 2019 are set at 65 percent of the national conforming limit of $484,350 (for a one-unit property). In high-cost areas, the housing agency’s loan limit “ceiling” was increased to $726,525, while its “floor limit” is set to $314,827.
Before you take further steps to make your home appealing to FHA buyers, check to see if your home’s listed price falls within the FHA lending limits for your area. If the market value of your home falls within the pricing guideline for your area, then you’re already one step ahead. If your home’s price is just above the loan limit, see if you can lower it. But if it’s far above the limit, your home may not be entirely available for FHA buyers. Unless a buyer can come up with the difference between the loan maximum and the selling price, they will not consider looking at your property.
While most home buyers will request a home inspection even if they're not using an FHA loan, the FHA will not approve a mortgage for your home until you repair any serious problems. You can help your home pass the inspection by fixing any defects, such as roof leaks, structural damage, pest and mold issues, heating system issues, pre-1978 interior or exterior paint that could contain lead, and other safety issues. By doing this, you’ll ensure that everything works properly to increase your chances of approval.
Just remember that a home inspection differs from a home appraisal. Home inspections evaluate the condition of your home to ensure that it meets safety, health, and building laws. So remember that just because your home passes the appraisal, it does not automatically mean that it will pass the home inspection.
A buyer can hire his or her own appraiser to evaluate your home. However, the FHA only relies on reports by its approved appraisers to help determine the value and condition of your property. This FHA-endorsed appraisal will be used to make the final loan decision. You can make the appraiser's job easier by providing them easy access to all areas of your home, including the attics, basement, crawl spaces, and other harder-to-reach places since they usually need to be photographed.
Closing costs can be a big hurdle for many FHA buyers, which is why you can make your house FHA-friendly by helping with those costs. The FHA enables sellers to help with up to 6 percent of the sale price of the home to help with closing costs.
While you are not obliged to help, it can be helpful so you can close a deal faster with an FHA buyer. By offering to pay for some of the buyer's closing costs, you can make your home stand apart from the crowd, especially if you are selling in a buyer’s market. Just keep in mind that your aim is to achieve your net goal by closing and be able to hand over your home to a reliable buyer.
Working with an experienced real estate agent when selling your home can work well to your advantage. But when you're taking these steps to prepare for FHA buyers, the easiest way to make sure you’re ready is to work with a real estate agent who knows the FHA process. Your realtor can guide you through the rules and limitations of the government program and can determine if your home is eligible. Lastly, the right agent can help you maximize the desirability of your property so you can attract more FHA buyers.