Bay Area

[hqly2001]

My agent told me that she hates dealing with FHA buyers and that more often than not they fall out of escrow in her experience. I read online and read that most bank hates to deal with FHA borrowers. I have a borderline regular sale and the best offer is from an FHA buyer. Supposedly good credit, income etc from the loan broker. I do not want to waste time and money. IS there really anything I should be concerned about with FHA borrowers? I understand that the lending guidelines would be stricter for them and more requirement from the appraiser, but is there anything else?

Are they really that bad to deal with? Maybe I should wait for a conventional buyer?

[sjbuyer]

I think the seller's fear of FHA loans is overblown.  I've done an FHA loan for purchase, and later refinanced into conventional.  The loan process was pretty much the same in either case.  Conventional underwriters were actually much more picky about my finances. The only gotcha with FHA is that the appraiser will be pickier about the smaller things that make the house habitable.  Make sure all the appliances are functional, light switches, heating system are in good order.  Assuming that your house is close to move-in condition, FHA should be easy.  Fixers are not a good candidate for FHA.

It is not true that banks hate FHA loans.  Banks really don't care because they get to pass off the risk to the government either way, and the risk transfer is more direct with FHA.  I would say they like them better, if nothing else.  FHA underwriting seemed more straightforward than conventional.  This is with the same bank.  The fear of FHA comes from the bubble days when FHA required relatively large amount of paperwork.  These days, the conventional loans jumped way ahead, and are at least equal in the paperwork department.

I assume you are selling a detached home.  Condos are a major pain with FHA, and if your complex is not approved, prepare for a long wait.

[Sonal_Basu]

I have to agree with the sjbuyer on this.  I work with many FHA buyers and come across many listing agents who put the same fear in their sellers.  I think if you have a good agent on the buyers' end, you should definitely consider the offer.  FHA buyers' money is just as good as conventional buyers' money.  

I hate when the listing agents give me story that the reason my buyers lost out on offers is because they are FHA buyers. My buyers are all preapproved and have good credit history and stable jobs.  The only reason they are FHA buyers is that they are first time buyers and don't have 20% down payment. 

When I bought my home, I did not have 20% down payment but I had enough to qualify for a conventional loan.  In Bay Area, how many buyers can come up with $100K to $150K down payment to buy their first home?

I think FHA buyers are more appreciative during their purchase because they understand that their purchasing power is weak. They count themselves lucky to have their offer accepted in most cases.  If you have a good agent on the buyer's side and have a good offer on the table, I say go for it.