NAR released and interesting economic research report about mortgage financing.  Did you know that FHA-insured financing used to be the go-to for first-time buyers who need a lower down payment, but that has changed: more first-time buyers are going with conventional rather than FHA-insured loans. According to the monthly REALTORS® Confidence Index Survey, 59% of first-time buyers obtained conventional, conforming loans in January 2021, while only 24% of first-time buyers obtained FHA-insured mortgages. In 2020, 57% of first-time buyers obtained conventional financing, up from 52% in the prior year. Meanwhile, the fraction of first-time buyers obtaining FHA-insured financing slightly fell to 29%.

One reason why first-time buyers are obtaining conventional financing and not FHA financing is the higher payment due to mortgage insurance. Borrowers who are first-time buyers and who meet income guidelines (income is no more than 80% of area median income) could also obtain a 97% loan-to-value conventional conforming mortgage where the payment to investors who purchase the mortgage backed securities are guaranteed by Fannie Mae and Freddie Mac. Click to read more analysis and see research data about this trend by NAR Research Economist: Scholastica (Gay) Cororaton