FHA Mortgages Increase in Popularity

FHA Mortgages keep getting more popular. In June, the share of applications for government-insured mortgages reached its highest level since November 1990, with government-insured loans accounting for nearly 36% of all mortgage applications, according to the Mortgage Bankers Association.

Most of those loans are made by the Federal Housing Administration, a New Deal-era agency that doesn’t actually make loans but insures lenders against losses. Other government-insured loans are offered by the Department of Veterans’ Affairs.

This summer, the FHA market share of mortgage applications has increased as fewer folks look to refinance or get a loan elsewhere as mortgage rates rise. The actual number of FHA loans doesn’t have to increase for its market share to go up.

But any surge in demand for FHA loans shouldn’t come as a surprise, especially when considering recent surveys that show home buyers still believe they shouldn’t have to sink large down payments into home purchases.  A recent survey of buyer attitudes by Zillow.com found that more than one-third of buyers don’t plan to make down payments larger than 10%, while nearly one-fifth of buyers don’t plan to put any money down.  Only 22% of buyers said they planned to make down payments that exceeds 20%.