Will It Be Easier to Buy a Home With an FHA Loan in 2022?

Home buyers using FHA loans have had a hard time in 2021.

The real estate market has been tilted in favor of sellers, due to low inventory and high demand. These seller’s market conditions allow homeowners to pick and choose what they feel is the best offer. In many cases, home buyers using FHA loans find themselves falling to the bottom of the stack.

As we wrote in a previous blog post, home sellers sometimes looking down on purchase offers from FHA loan borrowers.

They might fear an extensive home inspection that results in a request for repairs. Or maybe they believe FHA borrowers are less of a “sure thing,” compared to home buyers using conventional loans … or that the deal will take longer to close … or any number of other concerns.

Whether these concerns are valid or not is beyond the point of this article. (Hint: many of them are unwarranted.)

Today, we will look at some of the reasons why home buyers using FHA loans might have an easier time in 2022. In many ways, 2022 could bring a more buyer-friendly housing market.

Will 2022 Bring a More ‘FHA Friendly’ Housing Market?

It might be easier to buy a home with an FHA loan in 2022, compared to right now. That’s because there are more listings coming onto the market, as of late summer 2021.

If this trend continues, home buyers using FHA-insured mortgages might have an easier time (A) finding a property and (B) getting their offer accepted by the seller.

When there are more competing properties on the market, sellers have to carefully consider the offers they receive. This is something we could see more of in the coming months. And inventory growth has a lot to do with it.

In September of 2021, researchers from Realtor.com published a report that showed and increase in new real estate listings nationwide. In short, their report showed there have been more homes coming onto the market in recent weeks.

New listings rose by 4.3% from August 2020 to August 2021. In some cities, like Cleveland and Columbus, new listings were up by more than 20% over last year.

This is just one of several housing market reports that point to ongoing inventory growth within the real estate market. Granted, housing conditions can vary widely from one city to the next. But overall, it seems that there are more homes coming onto the market.

That’s good news for home buyers who plan to use an FHA loan in 2022.

Sellers Could Be More Accepting Next Year

Home buyers who wait until 2022 to purchase might find a more accessible and buyer-friendly real estate market.

If inventory levels continue to climb over the coming months, FHA loan home buyers should have an easier time finding a suitable property. They might encounter less competition from other buyers and have a better chance of getting their offers accepted.

Related: What sellers should know about FHA

The Realtor.com report mentioned above also showed that more and more sellers are beginning to reduce their asking prices to attract offers. That’s a big change from where we were a few months ago, when a high percentage of homes were selling for more than the original list price.

According to Danielle Hale, the chief economist for Realtor.com, home buyers nationwide could have an easier time buying a house in the months ahead.

“new listings grew at an unusually high rate for the summer months, further helping the inventory crunch,” Hale explained. “This is shifting the housing market balance in a more buyer-friendly direction…”

We are not saying you should wait until 2022 to buy a house. That kind of decision should be made based on your personal financial situation and long-term goals.

But if you do wait until 2022 to buy a home using FHA loan, you might have an easier go of it. If housing market supply levels continue to climb, it could cool a long-overheated real estate market. It could ease competition among buyers and make sellers more motivated.

More importantly, it could increase the chance that your FHA loan purchase offer gets accepted.

But Watch Out for Higher Costs Ahead

On the flipside, waiting until 2022 to buy a house could have some disadvantages for FHA borrowers.

Home prices across the U.S. are expected to continue climbing through the end of this year and into next. Mortgage rates could creep up her as well. In this scenario, home buyers who postpone their purchases until next year could encounter higher housing costs.

So there’s a lot to consider here, regarding the timing of your home purchase. Our advice is to use the mortgage product that works best for you, whether it’s an FHA loan or a conventional mortgage.

And once you’ve chosen your financing method, spend some time researching your local real estate market. Talk to an experienced agent to find out what conditions are like. Go into the home-buying process well prepared and well informed.