87% of Home Buyers Plan to Use an FHA Home Loan
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The Home Buying Institute is conducting a survey to measure the popularity and usage of FHA home loans. The first phase of the survey revealed that most home buyers plan to use an FHA home loan to finance their purchase.
The survey was presented to more than 12,000 readers, through the Home Buying Institute website. Of those who responded, 87% said they were planning to use an FHA loan to finance their home purchase.
Chart: Most home buyers surveyed are planning to use an FHA loan. Image permission
Definition: An FHA home loan is a mortgage loan that is insured by the Federal Housing Administration, which is part of HUD. This insurance protects lenders from losses resulting from borrower default (when the borrower stops paying). With this kind of protection, the lenders bear less risk. Loans must meet certain requirements established by FHA to qualify for insurance.
Survey Details: Phase one of this survey was presented to more than 12,000 visitors to the Home Buying Institute website, over a one-month period. The first question in the survey was: “Do you plan to use an FHA loan when buying a home?” Eighty-seven percent of respondents said yes, they were planning to use an FHA home loan.
Reasons for Using an FHA Loan
Those who answered “yes” to the first question were then asked about their primary reasons for using an FHA loan. Here are the results of that follow-up question:
- 53.8% said they wanted to use an FHA home loan for the smaller down payment. *
- 19.2% said they thought the overall qualification process would be easier.
- 13.5% said they previously had trouble qualifying for a conventional loan.
- 7.7% said they had low credit scores.
- 5.8% felt their income was too low to qualify for a regular loan.
* Borrowers who use FHA loans can put as little as 3.5% down. Conventional loans typically require a larger down payment. According to our survey, this is the biggest motivator for home buyers.
Chart: For the 87% of respondents who said they planned to use an FHA loan, these were the primary reasons given. Image permission
This survey suggests further growth in the FHA’s market share, which has already grown considerably in recent years. In the first quarter of 2010, almost half of all home buyers used an FHA loan to purchase a home. Brandon Cornett, publisher of the Home Buying Institute, expects that number to rise:
“Each month, we receive more than 200 email questions from home buyers. The frequency of FHA questions has increased steadily since the end of 2009. That’s what prompted the survey. The down-payment priority is not very surprising, when you think about it. A lot of people lost their savings during the recession, so they’re not in a position to plop down ten to twenty percent on a down payment. FHA loans have also been in the news a lot lately, due to various program changes. All of these things point to a continued rise in FHA usage.”
FHA Fact Sheet: In response to this survey, we have created an easy-to-read fact sheet about FHA home loans. It explains the pros and cons, the eligibility requirements, and the basic steps needed to apply. You can download the fact sheet for free, in Acrobat PDF format, on this page.
Reasons for Not Using the Program
Of those who said they did not plan to use an FHA loan, the following reasons were given:
- 57.1% said they did not know enough about the FHA program.
- 28.6% said they had excellent credit and enough saved for a down payment.
- 14.3% said they tried to use an FHA loan before, but got turned down (reasons not given).
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