FHA The Main Loan Program In Connecticut!!!

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

While the title says that FHA is the main loan program in Connecticut, the truth is that FHA is probably the main Loan Program in many other states as well.  With all of the changes that have happened in the last year to Fannie Mae, Freddie Mac, PMI Companies, and changes in Appraisal Guidelines, have made FHA is a very attractive Loan Product right now.

In the past year we have seen Freddie Mac and Fannie Mae incorporate several point adjustments into the pricing of loans that are backed by them.  There are hits for points if the FICO Score is under 740, further hits if the LTV is over 80%, and the price adjustments for Condo's, Multi Family, and Investment Properties are through the roof.  In some cases the price adjustments make it impossible for Lenders to be able to do a loan.

On top of all this throw in the PMI Company changes that require a minimum of 10% down if a property is in a declining area, along with not issuing PMI if the Back Ratio is over 41%, and forget about getting PMI on a 3-4 Family house these days.  With all of these changes Conventional Loans have become very, very difficult right now.

On the other hand FHA continues to only require 3.5% down, with no additional points assessed for LTV, Condo's, Multi Family, and Credit Scores (although some Investors have imposed minimum Credit Score Limits),  Rates have also been generally lower on FHA Loans versus Conventional Loans, and Debt-To-Income Ratios are very liberal once again.

With a standard Conventional Loan a Borrower must always have at least 5% of their own money for the downpayment (excluding My Community, and the Flex Programs that are not being offered by anyone I know right now) it can not be a gifted.  As oppose to FHA where non of the downpayment has to be their own money, it can all be a gift.  Also FHA changed their Appraisal Process a few years ago, so now there are no real major concerns for all the repairs that FHA use to require, and there is no longer much difference between an FHA Appraisal and a Conventional Appraisal.  OH yes there is one big difference from a Loan Officer or Broker prospective when it comes to FHA or Conventional Appraisals.  A Loan Officer and Broker can still communicate with the Appraiser if it is a FHA Loan, but can not if it is a Conventional Loan.

As you can see from just this brief description, between Conventional Loans and FHA Loan,  presently FHA is by far the Loan Product of choice these days, I know it is for me.  And Realtors that advice their Sellers to not accept an offer if the Buyers are going FHA (and yes I am still running into this) are doing their Sellers a great disservice.

I am sure that in the future the pendulum will once again swing towards Conventional Loans again, but for right now FHA is clearly the Loan Product of choice in my opinion.



Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, RI, MA, NH, and a FL Licensed Lender

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.


Comments (9)

Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

George - well I haven't dealt with FHA loans in the past but they are now very much part of our market. The biggest issue is condos that are affordable for first time buyers but which are not FHA approved, and may not get approval due to owner occupancy and other factors. And the conversion time frame has posed a problem in a number of situations as well.

Thanks for the information - this is such a great place for learning.


Jun 23, 2009 04:43 PM
Esko Kiuru
Bethesda, MD


That's it. FHA rules the mortgage market right now here, too, after being almost extinct only a few years ago. Agreed, once the market recovers, the conventional product will rise again.

Jun 23, 2009 05:14 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

I know the FHA is very popular here in Mass as well. Nice recap on all the morgage changes George.

Jun 24, 2009 12:52 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jeff those are big problems to over come that is why I said most states.  The new Condo Approval rules might make things a little easier for you since Approved FHA DE Lenders will be able to approve the Condo's in stead of it having to go to FHA, and they made it a little easier.  The new guidelines go into affect October 1st.

Esko this business does seem to go in cycles.

Bill, thank you, I tried to keep it simple.

Jun 24, 2009 01:02 AM
Karen Hurst
Rhode Island Waterfront!

Hi George:)   FHA is also prevalent here in Rhode Island. And yes, I see Realtors roll their eyes when I bring in an FHA buyer.  I would think that, in this economy, "any" buyer would be welcomed. I must mention though, that FHA is much stricter and my buyers have lost homes due to the inspection process. 

I agree that this business seems to go in cycles and Active Rain is a great place to stay on top of things.

Jun 24, 2009 10:19 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Karen in order for an FHA Loan to not get approved because of repairs listed on an Appraisal, the house would need to be in pretty bad shape since FHA relaxed its Appraisal Requirement about four years ago.  The only issue that I seem to run into with FHA Loans is on houses the have Well & Septic.  FhA requires the two to be at least 50 feet apart, and they also have requirements on how far they need to be from the house, where as Conventional does not have those requirements.  The issues that Conventional Loans are having with PMI, declining areas, and with point adjustment have presented a far greater problem for me.

Jun 24, 2009 02:47 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George FHA is now hip again.  I read some article the other day that it was so popular the system is overtaxed.

Jun 25, 2009 01:13 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jennifer I know that I have been doing more FHA than ever before, so I can see how it would be overtaxed if other Loan Officers are experiencing that same as me.

Jun 25, 2009 01:38 PM