Do Conventional Buyers Get Better Deals Than FHA Buyers?

The other day I had a client, who was planning on using FHA financing, as me if I thought she would be able to negotiate as good of a deal as if she was obtaining a conventional loan.  The concern was that, as an FHA buyer, would she be perceived as a weaker buyer in the seller’s eyes since FHA’s credit and income guidelines are not as stringent as Fannie Mae, and FHA requires a smaller downpayment as well.

This prompted me to do some research to see if I could determine if there was any merit tot he concern that a buyer going FHA may not be able to negotiate as good of a deal as a buyer putting more money down and going conventional.  To determine this, I looked at homes sold in St Louis County during the month of May with financing terms reported to the MLS and then looked at the percentage of the list price that FHA buyers paid versus the percentage of list price conventional buyers paid and here are my findings:

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  • Buyers utilizing FHA financing paid an average of  97.9% of the home’s list price
  • Buyers utilizing Conventional financing paid an average of 97.7% of the home’s list price

So, as the data shows, it doesn’t really appear FHA buyers were forced to pay any more for a home just because of the type of financing they chose.

Other facts from the research:

  • The median downpayment for FHA buyers was 5% and for buyers going conventional, 10%.
  • The median price of homes sold with FHA financing was $164,500 median price for homes with conventional financing was $259,500
  • The median days on market for the homes that sold with FHA financing was 16 days, for conventional financing it was 13 days.

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