Wanted some opionions based on personal circumstances, I'm a relative newbie so bear with me.

Personal hx:  FICO:  780  Income: 200 K+   Cash: 100 K    own/purchased 1st home: in 2003 using conventional loan  120K owed/160K value

I have put an offer for 350K on a short sale with buyer paying closing cost. This will now be my primary residence (keeping other as rental).   I'm also  estimating 50K (possibly more) in renovations.  

I've been preapproved for a FHA, but qualify for VA and Conventional.  For some reason my brokers have leaned slightly to FHA.    But doing more research and considering my finacial circumstances, I think a VA loan may be more appropriate for the following factors/principals.  Given my relative high income tax bracket, and need to keep cash for renovations,  I want to put as little money down, and maximize my ability to leverage given the low current interest rates. However, I'm having trouble comparing apples to apples in determining the overall value between the FHA and VA loans and possibly Conventional loans.  Other than the 3.5% vs 0% down and PMI verus VA funding fee, are there additional considerations I'm missing?

Thanks in advance, I'm just wondering if there are ease of closing considerations versus better margins for the broker as to why he is leaning towards FHA? 

JP,

In your situation, if you haven't used your VA entitlement before, I would recommend a VA loan.  You would not have mortgage insurance on a monthly basis on a VA loan, where you would have what is termed MIP on and FHA loan.  Your rate may be slightlyhigher on a VA loan, but it is certainly worth it.

Why is he leaning FHA?  Probably because he is not wellversed in VA loans and doesn't feel comfortable doing them or maybe they are not set up to do VA with their lenders.  It doesn't take much for an FHA approved broker to get set up to do FHA loan though, so my best guess is he doesn't want to learn how to do a VA loan and doesn't really understand them.

The only other consideration is that with an FHA loan, your broker will be able to select a trusted appraiser, while with a VA loan the appraiser is assigned by the VA.  This could mean a longer time until the appraisal is complete and the possibility that an incompetant appraiser is assigned (not likely,but it is a possibility).

I agree with Kent.  However you might also consider rolling up to $35,000 of the cost of renovations into the home loan.  If so you could consider an FHA 203ks loan.  There are certain things that you can't do like structural modifications and landscaping but most improvements are allowed.  If you are doing work that is considered energy efficient you could roll up to another $8,000 into the loan.  You can read about the EEM here http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm 

Thanks,

Gents,  I went back to my broker, grilled him a little bit more and you were right a majoritiy of his loans in his past 5 yrs were FHA not VHA.  He had only done a handful of VAs.  Also thanks for the ideas regarding rolling in renovation costs,  he hadn't brought that up either when I mentioned anticipated renovation costs.  Spoke to another broker, and there are similar programs with the VA loans.

It seems then that pound for pound,  the VA seems to be the better deal if you qualify for both and your property is within certain parameters.

Thanks,  God bless internet forums and helpful experts like you all.

Incredible updates, would appreciate more input from you all.

Just to recap.  I put in an offer of $352K not asking for closing cost and anticipating using an FHA loan based on the recommendation of the before mentioned broker.  This short sale property was listed at  $400K and the bank just rejected a previous offer of $345K as the "BPOs" came in higher (obviously)  Based on this information my agent and I decided to offer $352. 

I have thus done more research and came to the conclusion that I should revise my offer to reflect that I would use a VA loan,  (thanks to the advice of you all)

Today, I was informed the bank would like us to LOWER our bid to $311K as a recently ordered appraisal had just come in. (one that was not previously available when they rejected the first bidders $345K offer)  They told us the appraisal price to facilitate the deal claiming that I would not get approved anyway since my lenders appraisal would not permit a loan price of my original bid ($352).  Anyway  so in one fell swoop I "Saved" ~$40 K.

However, my agent through the before mentioned broker warned me that a VA Loan might not be as appealing to the bank (BANK of AMERICA)  as a same priced offer through an FHA because there are some fees that the buyer can not pay that would force the seller/bank to pay thus netting them less?  Can anybody validate if this is true?

After seeing all the twists and turns unfold,  I am starting to mistrust the entire system,  and the value of the "appraised",  "steal"  price of $311K.  If I end up paying 311K  I would be paying the Fair Market Value of the home. Should I not then try to negotiate at least a 5% discount?  My rationale being if they are desparate not to proceed into foreclosure, they really should have more wiggle room than the appraised price.

At this point I am relieved that I wouldn't have to pay my original bid price but I think that offer was predicated on misinformation.  Right or wrong I feel as if should be getting some sort of discount and have even considered waiting one or two months to pick it  up on foreclosure. 

My only fear would be that the previous bidder would find out about the lower price and claim first right to the lowered appraised price.  What do you gents think?

Thanks in advance.

JP Weng:

However, my agent through the before mentioned broker warned me that a VA Loan might not be as appealing to the bank (BANK of AMERICA)  as a same priced offer through an FHA because there are some fees that the buyer can not pay that would force the seller/bank to pay thus netting them less?  Can anybody validate if this is true?

There are some differences in FHA vs VA costs.  Typically they are the buyers portion of the escrow (closing agents fee) and tax registration.  Most lenders have some sort of underwriting or administrative fee tha the buyer can't pay.  All of these fees can be absorbed into a slightly higher interest rate if the seller won't pay them.  

I am not in a position to offer you advice on negotiations with the bank.  However, the bank isn't like a normal seller as you have already seen by the drastic price reduction they have offered.  If someone else was ready to pay 345 and you increased your offer to beat them out, I can only assume that you have looked at other properties in the area and felt that this was a good value at that price.  Be prepared to loose it to someone else that sees the $311 price as an excellent value.