NAR : 46% Of First-Time Buyers Use FHA Mortgages

Mortgage Newswire
Mortgage Newswire
The Mortgage Reports Editor
November 19, 2012 - 2 min read

NAR Profile of Home Buyers and Sellers : 46% of first-time buyers use FHA financingThe demographics of today’s home buyers are changing.

According to the annual Profile of Home Buyers and Sellers as published by the National Association of REALTORS®, single women and single men represent a smaller percentage of the market as compared to recent years.

Dual-income households account for a larger share.

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2013 Housing Market Outlook

For home buyers, the 2012 housing market has been an interesting one, characterized by rising home values, ultra-low mortgage rates, and a scarcity of home inventory nationwide.

Multiple-offer situations have become more common as home supplies have dipped below 6.0 months for both newly-built homes and existing home resales.

Sellers have leverage in many U.S. markets and, with low- and no-downpayment programs abundant via the FHA, the USDA, and the VA Loan Guaranty program, buy-side demand is expected to stay strong into 2013.

An improving job market figures to fuel home sales, too.

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The Changing Home Buyer Demographic

The housing market is expected to expand in 2013, but next year’s buyers will likely inhabit a different demographic than those from recent years.

Data from NAR’s Profile of Home Buyers and Sellers shows that, this year, 65% of home buyers were married couples or partnerships — a 7 percent increase from just two years. This data is consistent with the “unfreezing” of credit which has benefitted move-up buyers nationwide, among others.

Other noteworthy statistics from the 2012 Profile of Home Buyers and Sellers report include :

  • Single women account for 16% of home buyers, down from 20 percent in 2010
  • Single men account for 12% of home buyers, down from 9 percent in 2010
  • Unmarried couples account for 8% of home buyers, up from 7 percent in 2010

In addition, the NAR report showed that the number of first-time home buyers increased to 39% of all buyers in 2012, up two percentage points from 2010. The median age of today’s first-time home buyer is 31 years and the median income is $61,800.

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46% Of First-Time Home Buyers Use FHA Loans

The percentage of home buyers categorized as “first-time buyers” is growing. One major catalyst of this is that rents are rising in many U.S. markets; to the point where it can be less expensive to own and maintain a home than to rent one.

Low mortgage rates are helping. With the average 30-year fixed rate mortgage rate stuck below 4%, 2012 has been characterized by high home affordability. Purchasing power is 25% greater in 2012 as compared to 2011.

The availability of FHA mortgages has helped, too. More than 46% of first-time home used an FHA-insured mortgage to help finance their purchase.

FHA mortgages are common among first-time buyers for several reasons :

  • Minimum downpayment requirement of 3.5%
  • Lower mortgage rates as compared to conventional financing
  • Gifted downpayments are allowed

In addition, guidelines can be looser and easier as compared to comparable Fannie Mae- and Freddie Mac-backed loans, allowing higher debt-to-income (DTI) ratios and lower credit scores for approval.

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