Sam Khater, CoreLogic's Deputy Chief Economist, writes in the company's Insights blog that FHA's share of the purchase market skyrocketed from a low of 4% in February 2007 to a peak of 39% in November 2009. As private lenders fled, mortgage insurers collapsed, and the government sponsored enterprises Fannie Mae and Freddie Mac tightened lending standards, FHA became about the only option for low down payment loans.

Since that 2009 peak, the FHA's purchase market share has declined to 20% (as of last September). This is still five percentage points above its late 1990's average.

It is still a great mortgage program as only a 3.5% down payment is needed, and the down payment may be gifted from a family member. It also allows higher debt-to-income ratios and lower credit scores.

Information courtesy of Bill Holmes  with Front Street Mortgage