The Federal Housing Administration held almost 70% of home loans in the 1980s. Due to home prices appreciating faster than the loan limits of the FHA that percentage has drastically decreased over the past decades. To combat this, the 2008 government fiscal stimulus plan provided increases in FHA loans, from $417,00 to $729,750 in geographical areas with larger home prices.
This increase in the FHA loan limit has led to a surge in applications for FHA loans. As a matter of fact, the Mortgage Bankers Association showed a 15% increase in applications in a recent report.

Taking out an FHA loan has a lot of advantages compared to other, more traditional loans. For instance they have lower interest rates, usually around 1% less. The reason for this is that they can be resold to Freddie Mac or Fannie Mae, which implies a financial backing by the government.

You can also have a lot less equity with an FHA loan. Thanks to the recent credit crisis and declining value of houses lenders are lending much lower percentages of a home value to borrowers. This means many borrowers have to pay at least 20% down for home loans these days. FHA loans allow buyers to purchase a home with only 3% down.

This increase in FHA loans is great for people that want to purchase homes, but haven’t been able to put away enough money for a down payment. You don’t have to meet minimum requirements to qualify for an FHA home loan, but you will face debt-to-income ratios to prevent you from getting a home that you cannot afford.