The Current Landscape of Home Financing
In a typical year, most buyers take out a mortgage to finance their home purchase. According to NAR's 2023 Home Buyers and Sellers Generational Trends report, 78% of buyers financed their home purchase, most commonly 30-year, fixed-rate financing using a conforming loan. That’s a loan that’s packaged into a security by Fannie Mae or Freddie Mac and sold to investors on Wall Street. The two secondary mortgage market companies guarantee the securities, making them attractive to investors all around the world.
Many other buyers use financing backed directly by the federal government through FHA, the U.S. Department of Veterans Affairs, or the Rural Housing Service, a division of the U.S. Department of Agriculture. Jumbo loans, which are loans outside the conforming loan limit, are the largest type of privately funded, privately insured mortgages.
Many lenders also make loans underwritten on a proprietary basis and held in their own portfolio to help borrowers who don’t fit into standardized underwriting boxes but who represent reasonable credit risks.
Home Finance Resources
6 Different Types of Home Loans: Which One Is Right for You? (realtor.com®, Jul 17, 2022)
Almost everyone has heard of applying for or securing a mortgage, but there are several home financing options that fly under the radar for prospective home buyers. "Many types of house loans exist: conventional loans, FHA loans, VA loans, fixed-rate loans, adjustable-rate mortgages, jumbo loans, and more."
How Much House Can I Afford? Home Affordability Calculator (Forbes, Jul 18, 2022)
Home buying is an expensive endeavor, and many potential homeowners would struggle to make a payment in cash upfront. "And you’re not alone—87% of homebuyers had to finance their home purchase in 2021..." So, how much house can you actually afford, and how much will a bank be willing to let you borrow?
A Stress-Free Guide to Shopping for Home Loans (houselogic.com, Nov 10, 2022)
Fixed-rate or adjustable-rate mortgage? Conventional loan or government loan? There are many options when it comes to home loans, and this guide can help homebuyers understand the differences to make choosing the right mortgage a stress-free experience.