FHA Loans: A Popular Loan Option For Washington Buyers

October 28, 2018
Last updated:
December 28, 2021
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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 this article, we’ll take a look at how popular FHA loans are compared to other loan options for Washington buyers.

Around 19% of home buyers in Washington used FHA and VA loans to finance their purchases. The bulk of borrowers used conventional financing.

According to the US Department of Housing and Urban Development (HUD), over 275,000 Washington families used FHA-insured home loans to finance their home purchases over the past decade. It’s considered a safe and affordable way to for hundreds of thousands of Washington homebuyers.

FHA Loans Popular Among Home Buyers in Washington

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.

Here’s the market share for different loan programs last year:

  • GSE loan originations 42.9%
  • FHA/VA loans 19.3%
  • Portfolio originations 35.9%

Those percentages add up to 98.1%, 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.

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Conventional Mortgage Programs Could See an Uptick

The Urban Institute’s report is based on loan data collected from 2019.

For 2022, 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. 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 that the program has strong overall loan volume. And with the recent elimination of VA loan limits as of January 1, 2020, it could be an even more attractive loan option.

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. This eliminates the need for a down payment. Other mortgage programs just can’t compete with that.

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Need a Loan in Washington State?

Will you need mortgage financing to buy a home in Washington State? We can help. Sammamish Mortgage has been serving buyers across the Pacific Northwest since 1992. We offer a wide variety of mortgage products and programs with flexible qualification criteria to buyers all across Washington, Oregon, Idaho, and Colorado. Please contact us today with any financing-related questions you have.

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