(The Center Square) – Two in five first-time homebuyers who took out a mortgage over the past year used a loan backed by the federal government, according to a new report from the National Association of Realtors.
The Federal Housing Administration insured $1.65 trillion in mortgages as of Sept. 30, up from $1.29 trillion six years earlier, and 83% of the purchase loans it backed last fiscal year went to first-time buyers, according to its most recent annual report to Congress.
Repeat buyers reported a median household income of $127,000, up from $111,700 a year earlier, and 30% of them paid cash outright for homes. Among those who did take out a mortgage, 72% used a conventional loan, according to the Realtors' report.
FHA's insurance fund held $188.9 billion in capital at the end of September, a capital ratio of 11.47% against a 2% minimum set by Congress, and 4.42% under the report's most severe stress test, according to the agency's annual report to Congress.
FHA holds about 11 cents in capital for every dollar of mortgage it insures. Congress requires 2 cents. Even in a downturn as severe as the Great Recession, the agency's modeling says the fund would still hold more than 4 cents, twice what the law requires.
The agency's own report flags a problem underneath that cushion. FHA said its efforts to keep struggling borrowers in their homes are "currently approaching a 60% redefault rate, which is unsustainable and a detriment to the MMI Fund," and that in cases where borrowers cannot recover, it "must protect taxpayer dollars."
In other words, six in 10 borrowers who get a payment break or a modified loan fall behind again within a year, according to the report, which measures redefaults within one year of a loss mitigation action.
Jessica Lautz, NAR's deputy chief economist, said sellers have little reason to wait on a federally backed buyer.
"If you have an all-cash offer as a home seller, you're likely going to take that one just because you're not going to have any delay in closing time," she told The Center Square.
That was not always the case. The housing crash had flooded the market with foreclosures, and 55% of first-time buyers used FHA loans in 2009, according to the Realtors' report. Inventory was plentiful then, Lautz said, a federal tax credit was drawing buyers in, homes sat longer, and buyers using FHA, VA or USDA loans would "likely have their offer accepted with no problem."
FHA's foreclosures are also costing more than the agency expected. Its net loss rate on claims ran 34.19% through the first half of fiscal 2026 against a predicted 24.41%, nearly 10 percentage points higher, which FHA attributed to home appreciation that "has slowed and reversed in some parts of the country," according to its quarterly report to Congress.
FHA predicted it would lose about a quarter of what it paid out so far this fiscal year. It is losing about a third.
The 40-year-old first-time buyer at the center of this year’s report, the median age in the Realtors' survey, is a blend of two different groups. Lautz said the median age of first-time buyers who paid cash is 54, while those who took out a mortgage are 38.
A separate measure puts the first-time buyer younger. Research published by the American Enterprise Institute's Housing Center, which tracks credit records rather than surveying buyers, put the median age of first-time buyers taking out a mortgage at 33 in the second quarter of 2026, unchanged from a year earlier.
HUD did not provide an on-the-record response. VA said it has helped more than 330,000 borrowers avoid foreclosure or stay in their homes over the past two fiscal years. A USDA spokesperson said fiscal 2026 figures for Rural Development's single-family lending will not be published until the president's 2028 budget request in February.