real estate finance - full book (500 pgs)

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Unformatted text preview: conventional lenders in your area have prepayment penalties. Minimum Property Standards – As mentioned in the previous section, one of the reforms instituted by FHA was minimum property standards. Dynasty School (www.dynastySchool.com) 5-25 REAL ESTATE FINANCE This is important to a purchaser of a new home in that they assure that the property has been inspected on a periodic basis and has been certified to conform to a minimum set of standards. DISADVANTAGES OF FHA Like all programs, the FHA loan has advantages as well as disadvantages. This section will discuss the major disadvantages. Lengthy Process – In the past, a disadvantage of an FHA loan was that the amount of time for FHA loan approval was rather long. In the past, HUD–FHA required that upon completion of the application and after all of the supporting data had been received, these materials must be sent to the nearest FHA underwriting office. After the materials were received, checked, and found to have no major errors, FHA would issue conditional commitment or conditional approval. This process was very time consuming and could take as long as 6 months in rare cases and usually took 6 weeks. Then on February 23, 1983, the Department of Housing and Urban Development implemented the Direct Endorsement Program. This gave to lenders that meet certain requirements the ability to give in–house approval on FHA–insured loans. Thus, the program cut the time required for loan approval. As a real estate professional, you should contact the FHA office serving your area and secure a list of the mortgage lenders in your area that have met the requirements of the HUD–FHA Direct Endorsement Program allowing them to give in–house approval of mortgages insured by FHA. Upfront Discount Points – The first disadvantage is that the seller, as with a conventional loan, in some cases may have to pay a discount or points to have a property financed through FHA. Up until 1983, FHA set the interest rate which was usually below the market rate...
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