FHA loans are a popular mortgage option among home buyers in Washington State, and elsewhere across the country. They don’t compete with conventional loans, in terms of overall market share. But they do come in second.
In 2017, nearly 19% of home buyers in Washington used FHA loans to finance their purchases. The bulk of borrowers used conventional financing.
Nearly 19% of Home Buyers in Washington Used FHA Loans
The Urban Institute, a housing policy think-tank in based in Washington, D.C., conducts a lot of research into real estate trends nationwide. Among other things, they analyze and report on the market share of individual loan programs down to the state level.
We used their interactive map resource to find out how many home buyers in Washington State are using conventional, FHA and VA loans. The results were not surprising.
Conventional mortgage programs (those that are not insured or guaranteed by the government) have long been the number-one financing option in terms of overall market share. The Federal Housing Administration / FHA loan program usually operates in second place, while VA loans for military members come in third.
That was the case in 2017 as well. Here’s the market share for Washington State last year:
- Conventional loans 64.6%
- FHA loans 18.6%
- VA loans 14.7%
Those percentages add up to 97.9%, in case you’re wondering. The remaining 2.1% of volume was likely made up of special mortgage programs, such as the USDA’s financing program for rural borrowers.
Conventional Mortgage Programs Could See an Uptick
The Urban Institute’s report is based on loan data collected from 2017. At the time this article was published (October 2018), the finalized figures for 2018 were not yet available.
For 2018 and 2019, we could see an increase in the percentage of conventional loans used by home buyers in Washington and nationwide. We might also see a corresponding decrease in FHA’s market share. That’s because the down payment requirements for conventional mortgage programs have eased over the last year or so.
Fannie Mae and Freddie Mac (the government-sponsored corporations that buy home loans from lenders) have both increased the maximum LTV ratio for the mortgage products they can buy. In 2018, they both allowed loan-to-value ratios up to 97%. Conversely, this means that borrowers who use conventional loans could make a down payment as low as 3%. But a larger investment might be required in some cases.
Translation: Freddie and Fannie are now competing more directly with the FHA loan program, for borrowers who are seeking a low down payment financing option.
As a result of this shift, we might see more home buyers opting for conventional over FHA mortgage products.
VA Program Serves Washington’s Military Population
Washington State has a fairly large military population. There are a number of bases located throughout the state. As a result, there are quite a few military folks who can benefit from using the VA loan program to buy a home.
So it’s no surprise to see that program come in with some strong numbers, in terms of overall loan volume. In 2017, nearly 15% of home buyers who used a mortgage loan in Washington went with the VA program.
This program is open to almost all military members and veterans, and it offers some huge benefits. Eligible borrowers can finance up to 100% of the purchase price in many cases. This eliminates the need for a down payment. Other mortgage programs just can’t compete with that.