FHA Mortgages Set Record in June

Nearly 186,000 Federal Housing Administration (FHA) loans were made in June, the most in the agency's history, as its relatively relaxed lending standards continue to attract homebuyers squeezed out of other credit markets.

The Wall Street Journal is reporting the June total is the most in the agency's 75-year history, surpassing the previous record of 157,000 mortgages that was set last October, beating a record that had stood for 14 years.

The FHA record was set despite a severe downturn in the housing market that has monthly home sales currently running at only one-quarter of their rate at the top of the market in July 2005, according to figures from the Census Bureau. As other lenders have tightened their credit requirements, the FHA has emerged as one of the few remaining places where buyers can get a mortgage on a home purchase with a relatively small down payment, as little as 3.5 percent.

Other lenders may be able to provide better deals, particularly considering that the FHA requires a monthly premium for mortgage insurance, but are frequently demanding 20 percent down payments and credit scores of 700 or above in the current lending market. The FHA also tends to be more willing to accept lower credit scores.

According to a recent analysis by the Mortgage Bankers Association, FHA and Veteran's Affairs (VA) loans currently account for more than one-third of all home purchase mortgages, up from only 6 percent at the top of the housing market in 2005. It's the highest percentage of market share the two programs have taken in nearly 20 years. VA loans are the other primary option for low- or zero-down payment mortgages these days, though they are limited to veterans of the armed services.