Last month, 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.
In May, the government-insured share of mortgage applications stood at around 26%, down slightly from 27% in June 2008. Just four years ago, the government-insured share of applications stood at less than 6%. Back then, the proliferation of no-money-down loans made increasingly irrelevant the FHA, which requires down payments of at least 3.5%. Today, that's nearly impossible to find in the private market, and over the past two years, the FHA has watched its market share ramp up dramatically.
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%.
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