June 21, 2022
What does it mean to get an FHA loan when you are in a buyer’s market? What does it mean to use an FHA mortgage in a seller’s market?
If you are new to house hunting chances are you’ve heard these terms before, but what do they mean in the context of a house hunt?
FHA Home Loans In Buyer’s Markets
What does it mean to be shopping for a house in a buyer’s market? The simplest answer is that you have an advantage as a buyer because there may be plenty of homes to choose from with little serious competition from other buyers.
That lack of competition may be because of the supply of available houses for sale.
In a buyer’s market, you would still want to get pre-qualified for a mortgage to show sellers you are serious and not window-shopping, but in general, your experience leading up to the seller accepting your offer may be far less competitive in general.
You likely won’t find tougher credit qualifications applicable in a buyer’s market just because the market has plenty of inventory or is favorable to buyers rather than sellers; that said it’s still crucial to work on your credit a year in advance of your loan application or better for the best results.
FHA Home Loans In Sellers Markets
What does it mean to apply for an FHA mortgage in a seller’s market? When the inventory of houses for sale is lower than the demand for those new homes, it can create more competition to purchase those properties.
Getting pre-qualified in a seller’s market is an important step in taking that competition seriously.
You may have five or six people all trying to convince the seller to accept an offer and when inventory is low that competition could come down to who has the best credit scores and credit history as well as who is offering the most money for the house.
If you offer more money but have a hard time getting through the credit qualification process, you could lose out to someone who has comparatively little trouble qualifying.
It’s not necessarily that your lender is tightening credit standards (which is always possible depending on circumstances) but they may be using the upper end of existing standards when choosing who might be the best risk for the type of loan offered.
If you are buying in a seller’s market, be prepared to pay more for the home than you would in a buyer’s market. When there is more competition, a higher offer definitely helps. In a seller’s market you might do well to forego asking for seller concessions–FHA mortgages allow the seller to pay up to six percent of the price of the home toward closing costs.
But if you make an offer to buy that does not include an ask for seller concessions you could be in a stronger position to have that offer accepted, especially if someone else has already tried to negotiate seller concessions at a lower or similar sale price.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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