Real estate agents can help first-time and moderate-income buyers by dispelling the myths associated with FHA-insured loans.

Federal Housing Administration Commissioner Julia Gordon brought a clear message to attendees at the 2023 REALTORS® Legislative Meetings: We need one another.

FHA-insured loans—long a key source of funding for buyers taking their first step into homeownership—have seen eroding market share in recent years as first-time buyers were pushed out of the market by high prices, low inventory and all-cash offers.

Home Front 2023

Real estate professionals can help by educating their clients on the misperceptions that discourage sellers from considering FHA offers, which, in turn, hurts the most vulnerable buyers, said Gordon, who spoke Monday at the Regulatory Issues Forum. “It’s very important to dispel myths that float around out there in social media” and elsewhere, Gordon said. “You may have, at some point, had a different experience,” but in general, she said, FHA-insured mortgages:

  • Do not take longer than conventional mortgages to close.
  • Follow the same appraisal guidelines as conventional mortgages.
  • Don’t require sellers to pay fees on behalf of buyers.

In addition, the FHA can and does grant waivers for minor property defects. “Minimum property requirements may be less of a burden than you may remember from the past,” Gordon said, “and as you know, we only require a 3.5% down payment.”

The FHA has taken steps this year to increase access, Gordon said, like factoring a positive rental payment history into the underwriting process and addressing barriers to using the 203(k) program, which enables borrowers to fold renovation costs into the loan.

In March, the FHA cut its annual mortgage insurance premium by 30 basis points, from 0.85% to 0.55%. The Department of Housing and Urban Development estimates that 850,000 borrowers will benefit over the coming year, saving an average of $800 a year.

The FHA raised the premium during the Great Recession, when its Mutual Mortgage Insurance Fund dipped below a Congressionally mandated 2% reserve level. For several years, as the MMIF reserve level climbed, the National Association of REALTORS® advocated for reducing the MIP. But doing so wasn’t as easy as flipping a switch, Gordon told REALTORS® at the forum. “It has to move through the budget process, which is something we start 18 months before it goes into effect,” she said. “But we got it done, and we’re really excited about it.”

Over the next several months, the FHA is rolling out a public awareness program to educate people about housing counseling agencies, and Gordon asked REALTORS® to help spread the word to their clients. A HUD-approved counselor can answer questions on a wide range of issues, from budgeting to foreclosure avoidance. That’s becoming more important as pandemic-era protections go away. “So few people understand what it is,” Gordon said. “We need your help to get the word out that counseling is where people can get the objective advice they need.”