What is “FHA” and why is it so important for Cross Creek?
November 5, 2017 | Bill
Getting FHA certification can be a really good thing. FHA certification means that a
property in a specific community is eligible for a FHA mortgage. Cross Creek has
worked very hard to get this certification expanding the pool of eligible buyers which
has dramatically increased the value of our community through competition the past 3
years. What is alarming though is that I have noticed lately a lot of the homes being
marketed with agents not familiar with Cross Creek. Agents who have not done their
research and left this field blank in FMLS/GaMLS or even worse state that we are not
FHA approved. This misinformation is a huge disservice to their client and our
community in that it implies that our HOA is not solid. Keep in mind that last year
almost half of the mortgages on properties sold in Cross Creek were FHA. By these
agents checking the wrong box they are eliminating half of the eligible buyers for that
property. Do you think they are going to get top dollar? NO.
Most seasoned buyers opt for a conventional mortgage because in most cases it best
suits their needs. However, for a first-time home buyer a FHA mortgage is a VERY
big deal and this is why:
A recent article in the New York Times: Home Ownership and Wealth Creation
discussed how homeowners had 35x more wealth than those that rent.
The basis to all of this is home ownership. Young professionals are starting to realize
that to build real wealth AND lower their monthly housing costs ownership is the way
to go, but there are real obstacles to acquiring that first home.
Young professionals today, the kind that every community wants, are carrying a huge
burden. These are the doctors, lawyers, and other highly educated young people that
are early in their careers and most all of them have huge college loan debt as the
below graphic shows. U.S. student loan debt in 2012 exceeded $1.2 trillion and is
increasing at the rate of 14% per year.
So what does this have to do with a FHA Mortgage?
Everything. Student loan debt is the biggest obstacle facing first-time home buyers.
There are many requirements for a buyer to qualify for a home loan: Down payment,
Income, Credit Score, and Debt Ratio are the primary factors. Of these factors: DTI or Debt-
to-Income Ratio is the biggest challenge.
Conventional mortgages in general have a cap of 43% DTI. Meaning that a
borrower’s total monthly debt cannot exceed 43% of their monthly income. A FHA
home loan allows for most borrower’s up to and as much as 56-57% DTI. As a young
professional carrying a huge student loan debt this is the difference between becoming
a homeowner or not. FHA does have some other great benefits such as requiring only a 3.5% down
payment vs. 5% on conventional, greater flexibility on gift funds from Mom and Dad,
lower credit score requirements, and in most cases a lower interest rates.
WOW this loan sounds great why doesn’t everyone use it? It has a huge downside.
FHA home loans require mortgage Insurance for the entire life of the loan and it is
calculated at a much higher rate than a conventional mortgage. That is why even
though it has a lower interest rate the monthly payment is much higher than a
conventional mortgage for the same purchase price.
Why this is Important to communities like Cross Creek?
I cannot stress enough why it is important to have a great agent market your home that
truly knows our community and the importance of FHA certification. It increases
home values due to demand. Cross Creek is a great community with a unbelievable
value at its current price points. Intown Atlanta is filled with young professionals that
can only purchase a condo with a FHA loan. Most buyers in this 100-250K price
range are young professionals. This is a huge key segment of the buying public for
Cross Creek. The seasoned 2nd and 3rd time home buyers are looking at higher price
points due to higher income, equity resources, and larger households needing larger
Getting this FHA certification is a huge win for Cross Creek. Now suddenly there are
as many as five times the number of active buyers considering purchasing in Cross
Creek because of this FHA loan availability. For current sellers this is an awesome
thing. Higher demand brings higher sales prices through competition for a limited
number of listings if and only if their agents communicate this in FMLS/GaMLS.
For our older residents having FHA certification it now means they can take out a
reverse mortgage and that is another conversation for another time…..
For those of you that are grammar hawks I know that there are
huge grammatical flaws in my writing style. I am an excellent REALTOR with a
strong proven record…. I do not hold myself out to be a great writer….lol…
All the Best, Bill