Third Quarter 2021 Reaches a 13-Year High for Conventional Loan Share of New Home Sales

 

The National Association of Home Builders shared that 75.5% of new home sales that were recorded in the 2021 third quarter was the largest share seen since the first of the 2008 Great Recession. The data comes from the U.S. Census Bureau's Quarterly Sales by Price and Financing.

The Quarterly Sales by Price and Financing reports are surveys of New Residential Sales that are done every March, June, September and December. These are tables that are published through the U.S. Census Bureau.

This record share saw an increase of 1.7 percentage points over 2021 2nd Quarter and has kept rising for the last three quarters. This has shown an increase of 6.9 percentage points since Q4 2021.

As for sales backed by conventional loans, the share increased quarter-over-quarter 74% from Q3 2020 to Q3 2021. The data shows a 4.9 percentage points gain over Q2 2021. FHA-backed sales came in at 11.9% in Q3 2021 which was a decline of 1.1 percentage points over Q2 2021. As for year-over-year, it was a decline of 6.6 percentage points.

VA-backed sales also came in with a decline of 1.7 percentage points from Q3 2020. The data shows a 4.9% decline which is the exact opposite of cash purchases.

Cash purchases rose 7.6% making this a rise for the past two quarters. It is now 4.4% which is the largest we have seen since Q4 2014. For Q3 2021 there was a 7.7% climb with 1,000 sales and a 4,000 increase year-over-year.

The 30-year fixed rate for both conventional and government-backed mortgages also declined quarter-over-quarter. Conventional-backed mortgages reported a 93 basis points decline while government-backed mortgages came in 72 basis points lower than seen in Q4 2019.

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How A Down Payment Can Affect Your Purchasing Power

Down payments are a big part of purchasing a home with a mortgage  Your minimum down payment depends on the type of mortgage, the lender and your finances.

When borrowing money from a lender to purchase a home, the more cash you put down, the better your financing terms will be. It is important to understand what a down payment is and how much cash you need to have. A down payment is the cash that is put down on a large purchase such as a car or a home. The amount of the down payment is usually a percentage of the total amount of the cost. A $350,000 home with a down payment of 10% would be $35,000.

Different lenders and different loans will require a different percentage of the whole cost for the down payment. If you are obtaining a VA loan or a USDA loan you are not required to make a down payment because these are backed by the federal government. The magic number in most cases, when it comes to a down payment, is 20%. With most lenders, 20% down on the purchase of a home will give you a good mortgage rate and allow you to bypass mortgage insurance. An FHA loan that is backed by the FDA, requires a minimum of 3.5% of the purchase price. Many conventional loans (Fannie Mae HomeReady and Freddie Mac Home Possible) mortgages require as little as 3% down.

Remember, a larger down payment will get you a better mortgage interest rate, lower upfront and ongoing fees, more equity in your home from the start and a lower mortgage payment. Lenders like a larger down payment because the risk becomes lower for them. A professional lender can help you through this process. They can help you determine how much to put down and how it affects your monthly mortgage amount.

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FHA Reducing Loan Costs for Credit Challenged Buyers

There is no question that the Recession affected both the mortgage industry as well as the home buying process when it comes to obtaining a loan to buy a new home.  Mortgage companies, lenders, and banks had their feet “held to the fire” and were required to jump through multiple hoops in all categories and steps to the loan procurement process.  Even now, on average, it takes 6 weeks to 3 months just to refinance your existing home even if you have (and have had) a steady job, money in the bank, equity in your home, and excellent credit.  The strict requirements that lenders are applying

to loan applicants are also being applied to their own corporations with stiff penalties and sanctions in store for any bank or mortgage company that even comes close to “bending the rules.”

With that being said, Fannie Mae and Freddie Mac who were able to restructure and survive the housing market falter have now found a way, along with the FHA (Federal Housing Administration) to finally bring some relief to first-time home buyers by offering loans with either a 3.5% or 3% down payment of the loan.  Now, the FHA has reduced the cost of its loan for first-time home buyers, dropping from 1.35% of the loan value to just .85% of the loan value.  The FHA provides an affordable loan to all home buyers and does not, for the most part, discriminate against home buyers who are “credit challenged,” those who may have a less than stellar credit score.  Therefore, as long as you are above the threshold of the credit score required by the FHA, your loan cost will be the same whether you are 5 points above the threshold or 200 points above the threshold.

FHA loans are the most beneficial for custom home buyers who cannot afford a 10% down payment on their loan, who may have had struggles with credit in the past, and first-time home buyers.  Fannie

Mae and Freddie Mac were established just after the Great Depression as lenders backed by government bonds in order to allow low-income Americans to be able to buy a house.  They have since privatized and restructured, but they are still focused on helping low-income or struggling families afford and pay for their new house.  With the latest reductions in down payments and loan costs, it could now be affordable and plausible for younger professionals to graduate from college, start their careers, and form their own households by buying a new home for the first time.

If you are in the market for a new home to buy in St. Tammany Parish on the Northshore of Lake Pontchartrain in New Orleans, Louisiana, come Visit Bedico Creek Preserve in Madisonville, Louisiana to view 9 new Neighborhoods of Homes for Sale within our masterplanned community just outside of Covington, LA.  We have 18 builders building new and custom homes in our subdivision.  Many builders can and will build any size or type of home that meet our architectural standards.  Call 985-845-4200 or E-mail Info@LiveBedico.com today to find out more about our new home community!


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