According to statistics released by Ellie Mae from their mortgage database, just over 1 in 3 millennials choose FHA loans to purchase their homes. This compares to the overall FHA market share of 21 percent. And, the FHA reported that over 80% of the purchases made using an FHA loan were to first-time home buyers.
What these numbers mean is that FHA loans are an important part of any mortgage lender’s tool kit, including credit unions. Unfortunately, too many credit unions don’t offer these important government products.
In speaking with credit union leaders from across the county, there are a variety of reasons why they choose not to offer FHA loans. Some of those reasons include:
- FHA loans are viewed as more complex than conventional loans.
- Fannie and Freddie don’t purchase the loans.
- You don’t have a designated underwriter with FHA credentials.
- The FHA insurance premium lasts the life of the loan (which is way different than conventional loans’ PMI coverage).
Whatever the reason, it’s not a good one. FHA loans NEED to be in your product mix.
FHA loans aren’t significantly more complex. They just have different rules and guidelines. There’s no reason you couldn’t learn these guidelines, just like you learned the guidelines to sell to Fannie or Freddie.
Sure, Fannie and Freddie don’t purchase FHA loans, but there are a lot of lenders and investors who do. The Federal Home Loan Banks all purchase FHA loans. So do many CUSOs. Just because you can’t sell to the GSEs doesn’t mean you can’t find a lender that will protect your member and not cross-sell them.
And yes, you need an underwriter with a designation, and these underwriters typically command a higher salary in the market place. But FHA loans are traditionally slightly more profitable than conventional loans. You could generate more income to cover the increase in salary costs.
Finally, the insurance premium on FHA loans isn’t cheap. There’s an upfront premium as well as a monthly premium, and it lasts for the life of the loan. However, if you’re trying to attract first-time home buyers and millennials, how long are they going to live in the house before they move up? Five years? Seven years? Probably something along those lines.
Your credit union has the chance to access 80% of first-time home buyers. Give a good reason why you would pass that up!
Plus, your credit union has a chance to offer a product that 35% of millennials are choosing to buy a home. Do you have a good reason why you would pass that up?
You need to help your members seize the mortgage. Offer FHA loans to your members and thrill them by satisfying their home ownership needs.