Pin Me

FHA Pros and Cons for the Seller

written by: Khaye Mydette Sy Cardenas Macalinao•edited by: Donna Cosmato•updated: 1/25/2011

Are you wondering if it's to your benefit to have an FHA buyer for your property? Shop around, check out the FHA pros and cons, seller advantages and make the decision that's right for you.

  • slide 1 of 4

    Why More People Use FHA

    In the past, only a few families could afford to save money to buy a home for cash, especially during their child-rearing years. With the help of the Federal Housing Administration program (FHA), owning a home has become easier. FHA paves the wave to mortgage affordability and allows people to own their dream house with very little out of pocket expense. Even when a family's expenses are at their peak, their dream home is just within reach.

    While more and more buyers try to take advantage of the program, some sellers are really furious about it. Why? Does this program really create drawbacks for them? What are the FHA pros and cons, seller disadvantages, and other issues? Should you entertain a buyer who has been preapproved for an FHA insured mortgage? This information will help make the right decision.

  • slide 2 of 4

    Seller, Should You Really Worry?

    An FHA home loan is any mortgage loan insured by the Federal Housing Administration as a part of the U.S. Department of Housing and Urban Development (HUD). Because the government aims to finance borrowers who may have limited funds to purchase a property and probably do not meet the desirable credit scores, the entire process is more stringent than the requirements for any other loan. Seller, these are the “hoops" that you must jump through:

    • The property you are selling will be thoroughly checked by the FHA in regard to quality, and it must pass all their requirements. Your property will be inspected several times, and you may be required to make repairs.
    • If your property is high-end in price, you may not be able to sell it to an FHA borrower since these loans have limits. FHA home loans have relatively low limits compared to other loans.
    • You may be asked to pay fairly heavy costs to assist an FHA buyer during the entire process.
    • You are required to pay some of the closing costs on an FHA loan, which means extra expenses for you.
    • Processing times may be longer on FHA loans than for conventional mortgages due to the additional paperwork.

  • slide 3 of 4

    The Bright Side of FHA

    It's can hard, time consuming, and expensive to find buyers for a property. With an FHA loan, buyers pay only a 3.5 percent down payment instead of the typical 20 percent. This means that you'll be able to convince more buyers to consider your property.

    Anybody can take advantage of the loan, especially first-time home buyers and low- to moderate-income buyers, and it has no income limit qualifications. Furthermore, with today's improved FHA mortgage system, such as an easier inspection and improved process on property appraisal, there are definite advantages to considering an offer with FHA financing. So if you happen to have a motivated buyer who has been preapproved for an FHA insured mortgage, that is equal to holding a chain of gold. Educate yourself and weigh the FHA pros and cons, seller.

  • slide 4 of 4

    References and Image Credits

    Image Credit: Wikimedia Commons/Zlatko/Creative Commons Attribution ShareAlike 3.0 Unported license

    Reference Resource: http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration