87% of Home Buyers Plan to Use an FHA Loan, Mostly for Down-Payment Reasons

A new survey conducted by the Home Buying Institute revealed that most home buyers plan to use an FHA home loan to finance their purchase. Eighty-seven percent of respondents were in favor of the FHA option.

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Round Rock, Texas (PRWEB) June 4, 2010

In May of 2010, the Home Buying Institute conducted an online survey to measure the popularity of FHA loans among home buyers. These are mortgages that are insured by the Federal Housing Administration, a government agency that is part of HUD.

The vast majority of respondents (87%) said they were planning to use an FHA loan to purchase a house. Of that majority, most cited the lower down-payment requirement as the reason for their choice.

The survey was presented to more than 12,000 home buyers. About two-thirds of the respondents were first-time buyers, and the rest were repeat buyers. This survey was conducted online, on the Home Buying Institute website, running from May 1 - May 31, 2010.

Breakdown of Survey Results

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.

Those who answered yes were asked about their primary reason for using an FHA loan. Here are the results of that follow-up question:

-- 53.8% said they were using an FHA loan for the smaller down payment. (1)
-- 19.2% said they thought the overall qualification process would be easier.
-- 13.5% said they had trouble qualifying for a conventional mortgage loan.
-- 7.7% said they had bad credit.
-- 5.8% felt that their income was too low to qualify for a regular loan.

(1) Borrowers who use FHA loans can put as little as 3.5% down, whereas conventional loans usually require a larger down payment. This is by far the biggest lure for home buyers, especially those who are buying their first place.

You can view survey details, graphics and commentary on this page:
http://www.homebuyinginstitute.com/news/fha-survey/

FHA home loans have always been popular with home buyers, especially those with low income or less-than-perfect credit. But when the credit markets began tightening (after the subprime mortgage crisis of 2008), the popularity of FHA loans skyrocketed.

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:

"Every month, we receive about 250 questions from home buyers via email. The number of FHA-related questions has risen steadily since the beginning of this year [2010]. That's what prompted us to launch this survey. The down-payment motivation is not surprising to me. 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. The FHA gives them a side-door to homeownership."

In response to this survey, the Home Buying Institute has created a fact sheet on FHA home loans. This document explains the pros and cons of these loans, eligibility requirements, and the application process. You can download the fact sheet for free, in Acrobat PDF format, by visiting:
http://www.homebuyinginstitute.com/news/fha-survey/

About the FHA Program

FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance. Source: HUD.gov

About the Home Buying Institute

The Home Buying Institute was created in 2006 as an educational resource for home buyers. Since then, it has grown into one of the largest home-buying websites in the United States. The site is privately funded to ensure editorial neutrality. It offers thousands of articles related to mortgage loans and home buying, as well as a news blog that covers the housing market.

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