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FHA Rates Are Attracting Higher-Quality Borrowers

Mortgage lenders, take notice: Federal housing loans are going upmarket. 

Today’s average Federal Housing Authority borrowing rate is 50 basis points lower than the rate for conforming mortgages – in 2018, FHA rates were 13 bp higher than conforming rates (see chart). That 63-bp swing is largely the result of more borrowers with relatively higher credit scores opting for an FHA program as home affordability concerns continue to mount.  

Overall, the number of borrowers choosing FHA is up 40% since 2018, and FHA loans now account for 17% of all mortgage lending. 

This trend signals a growing opportunity for lenders to expand their offerings within the government market as a means of reaching more potential borrowers.  

Rates And Volume Mix Of FHA Vs. Conforming Loans​

As FHA rates have continued to decrease versus conforming, its volume has surged.​
Source: Lendersbenchmark Retail Mortgage Originations - Funded

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