The world of nonconventional mortgage financing is complex.
All manner of loan programs available through the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), U.S. Department of Agriculture, state-backed housing initiatives and private mortgage lenders make homeownership accessible to Fannie Mae- and Freddie Mac-ineligible borrowers.
When it comes to purchases of newly built homes in 2024, the use of nonconventional financing declined to 31% from 32.4% in 2023. Conventional loan programs dominate mortgage lending across all home sales, and sales of newly built homes prove no exception.
However, a research note published by the National Association of Home Builders (NAHB) highlights regional patterns in the utilization rates of nonconventional financing, as tracked by the U.S. Census Bureau in its annual construction survey.
NAHB found that among the nine U.S. census divisions, East North Central (Ohio, Indiana, Illinois, Michigan, Wisconsin) had the greatest share of new-home sales financed with nonconventional loans in 2024 with 39%.
East South Central (Kentucky, Tennessee, Alabama, Mississippi) and West South Central (Texas, Oklahoma, Louisiana, Arkansas) followed with 38% of new-home sales closed using nonconventional financing.
Nonconventional financing was used in just 24% of new-home sales in the South Atlantic division (Delaware, Maryland, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida) and 25% in the Middle Atlantic division (Pennsylvania, New York, New Jersey) and Mountain division (Arizona, New Mexico, Colorado, Nevada, Utah, Idaho, Wyoming, Montana).
Nationwide, cash purchases accounted for 13% of all nonconventionally financed new-home purchases, down slightly from 14% in 2012. FHA-insured loans accounted for 11% of new-home sales in 2024 after 12% in 2023, while the share of VA-backed loans was at 4%.
By nonconventional financing type, cash purchases led in five out of nine census divisions with 27% in East North Central, 23% in New England, 21% in East South Central, 16% in Middle Atlantic and 15% in West North Central (North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa, Missouri).
FHA-backed loans accounted for 20% of nonconventionally financed homes started in the West South Central division. In New England, less than 1% of new-home sales used FHA-backed loans. Just 1% of East South Central buyers used FHA loans for new homes in 2024.
VA-backed loans were most used in the West North Central division, accounting for 10% of nonconventional forms of financing on new-home sales last year. Only 1% of the new homes started in New England used VA-backed loans in 2024, however.
