Non-conventional lending enjoyed a
substantial increase in its share of the market for financing new home
purchases in 2019. The National Association of Home Builders (NAHB) says, while
conventional loans continued to dominate those purchases, its share shrunk from
71.4 percent of the market in 2018 to 65.0 percent in 2019 while non-conventional
mortgages increased accordingly, from 28.6 percent to 35.0 percent.
conventional mortgage is a home loan that isn’t backed by a government agency. Non-conventional forms of financing include loans insured by
the Federal Housing Administration (FHA), VA-backed loans, cash purchases and
other types of financing such as the Rural Housing Service, Habitat for
Humanity, loans from individuals, state or local government mortgage-backed
NerdWallet says conventional
mortgages often meet the down payment and income requirements set by the GSEs
Fannie Mae and Freddie Mac, and they often conform to the loan limits set by
the Federal Housing Finance Administration (FHFA), the GSE regulator.
Conventional loan borrowers who put at least 20 percent down don’t have to private
mortgage insurance which is typically required with lower down payments or
writing in NAHB’s Eye on Housing blog says the Census Bureau’s Survey of
Construction (SOC) data indicates that
FHA financing was the most common form of non-conventional loans. Its share of
new home purchases increased 4 percentage points from the prior year to 15
percent. The share of cash purchases,
the second most prevalent form of non-conventional financing, was at 11.0
percent nationwide in 2019. VA-backed loans accounted for 6.0 percent and other
financing has a 3.0 percent market share.
The reliance on non-conventional
forms of financing varied across the United States. The high was in the West
South Central census division (Texas, Oklahoma, Louisiana, Arkansas) at 48.5
percent and lowest in the Middle Atlantic division (New York, New Jersey,
Pennsylvania) at 15.8 percent.