Company: LGIH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001580670-25-000016
Chunk: 59

Company: LGI Homes, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1
Chunk 59
---
 our purchasing power, making it more difficult and/or more expensive to maintain sufficient funds to operate our business.

Higher mortgage interest rates, tightening of mortgage lending standards and mortgage financing requirements, and untimely or incomplete mortgage loan originations for our homebuyers could adversely affect the availability of mortgage loans for potential purchasers of our homes and thereby materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

Almost all of our customers finance their home purchases through lenders that provide mortgage financing. Mortgage interest rates have increased significantly since January 2022, which has negatively impacted the overall housing market. The current and continued macroeconomic conditions impacting the homebuilding industry include inflation and mortgage interest rates. The significant burden of inflation and higher mortgage interest rates for our customers since January 2022 are viewed by us as the primary driver behind the subsequent decrease in demand for new homes. However, we cannot predict whether mortgage interest rates will rise, remain high or fall. If mortgage interest rates increase, the ability of prospective homebuyers to finance home purchases may be adversely affected, and, as a result, our operating results may be significantly negatively impacted.

Additionally, rapid increases in interest rates may negatively impact the affordability of a home purchase for existing buyers in backlog who still need to lock in a mortgage interest rate for their loan. This volatility could lead to an increase in cancellations of home purchase contracts. Our homebuilding activities depend upon the availability of mortgage financing to homebuyers, which is expected to be impacted by ongoing regulatory changes and fluctuations in the risk appetites of lenders. The financial documentation, down payment amounts and income-to-debt ratio requirements are subject to change and could become more restrictive. 

The federal government has a significant role in supporting mortgage lending through its conservatorship of Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), both of which purchase or insure mortgage loans and mortgage loan-backed securities, and its insurance of mortgage loans through or in connection with the Federal Housing Administration (“FHA”), the Veterans Administration (“VA”) and the U.S. Department of Agriculture (“USDA”). FHA and USDA backing of mortgage loans has been particularly important to the mortgage finance industry and to our business. If either the FHA or USDA raised their down payment requirements or lowered maximum loan amounts, our business could be materially affected. Increased lending volume and losses insured by the FHA have resulted in a reduction of the FHA insurance fund. The USDA rural development program provides for zero down payment and 100% 

16