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As ResiClub has covered through the cycle, FHA-financed purchases have made up a growing share of giant homebuilders' sales ever since the Pandemic Housing Boom fizzled out in mid-2022 and the nationally aggregated housing market slipped into the cyclical cooling window we've been passing through, a window in which some core homebuilding markets across markets like Texas, Florida, and the Mountain West have undergone outright price corrections.

FHA mortgages, which are insured by the Federal Housing Administration, are commonly used by first-time and lower-credit-score buyers. FHA loans require as little as 3.5% down and accept lower credit scores and higher debt-to-income ratios than most conventional loans. Because they're more prevalent among entry-level purchasers, a builder's FHA share is a decent read on how much it depends on the bottom of the for-sale market. Part of the post-boom increase is simply a reversion to the mean. During the red-hot Pandemic Housing Boom, FHA buyers became a smaller share of builder sales. Ultra-low mortgage rates made conventional financing cheap, many builders were metering sales and raising prices because demand outstripped what they could deliver, and a wave of wealthier, higher-income buyers relocated from expensive markets like New York, Seattle, and San Francisco to places like Boise, Austin, and Tampa, often with sizable equity or cash from selling a coastal home. Builders didn't need to reach deep into the buyer pool, so they didn't.

The other reason for the recent jump in FHA loans is strained affordability. The Pandemic Housing Boom's run-up in home prices, followed by the 2022 rate shock, has many buyers stretching themselves further just to get in the door. For many of them, particularly those with lower credit scores or higher debt loads, qualifying for a conventional loan at an affordable payment simply isn't possible. Large builders like D.R. Horton run their own mortgage operations, which finance the majority of their buyers and are the primary vehicle for the mortgage rate buydowns builders have used to prop up sales since 2022—and many lean into FHA loans. FHA allows sellers to contribute up to 6% of the purchase price toward a buyer's costs, compared with 3% on conventional loans with less than 10% down (although, builders can get around that if the permanent buydowns are funded through bulk forward commitments, which are excluded from the seller concession limits). Once the rate shock made buydowns essential, the extra room became far more valuable. FHA's costs also don't climb with lower credit scores the way conventional loans' loan-level price adjustments and private mortgage insurance do, and in 2023, HUD cut FHA's annual mortgage insurance premium from 0.85% to 0.55%. Put together, a low down payment, looser credit and debt-to-income standards, a bought-down rate, and cheaper mortgage insurance can turn a buyer who wouldn't qualify conventionally into a closed sale.

Another factor is that many builders had been pivoting toward entry-level buyers, who are more likely to use FHA financing. Recently, however, that shift has leveled off, since the entry-level spec market is exactly where many of the biggest homebuilders have run into problems over the past couple of years in the weakest Sun Belt markets.

To gauge homebuilders’ exposure to the FHA market, ResiClub reached out to the AEI Housing Center. Looking through the data, you can see the FHA range among giant homebuilders is stark.

Homebuyers using FHA financing:

It makes sense…

This doesn’t mean high-FHA builders are in distress. But it does suggest they’re more tethered to the health of FHA borrowers—and thus more exposed to softness at the bottom of the market.

Through a historical lens, mortgage delinquencies remain relatively low. The post-pandemic credit box was tighter than during the mid-2000s “bubble”, the labor market (while softer than 4 years ago) is still holding up, and most homeowners are sitting on sizable equity cushions. That said, FHA loans have seen a notable uptick in stress over the past two years.

FHA 30+ day delinquency transition rates have risen meaningfully since 2022, even as GSE loans (Fannie Mae/Freddie Mac) remain comparatively subdued. VA loans have also ticked higher, but FHA stands out. This divergence makes sense. FHA borrowers tend to have lower credit scores and thinner financial buffers. When inflation surged and borrowing costs spiked, those households were more exposed.

Keep in mind: FHA is still a minority slice of the mortgage universe. According to the New York Fed, in 2025, FHA mortgages represent about 12% of the nation’s $12.94 trillion in mortgage debt. By comparison, GSE-backed conventional loans account for a much larger share. If you cut it by just volume and not dollars owed, that share jumps up.

However, FHA usage is not evenly distributed.

The U.S. South—the epicenter of U.S. single-family homebuilding—has a higher concentration of FHA mortgages. States such as Mississippi, Louisiana, Alabama, and Texas show elevated FHA shares relative to much of the Northeast and West Coast. That geographic overlap matters. Many of the nation’s largest production builders are heavily concentrated in the Southeast and Texas. If FHA borrowers experience disproportionate stress, it could have a more visible impact in those markets.

The FHA segment also absorbed an additional hit over the past year. In March 2025, the Federal Housing Administration announced that, starting in late May 2025, H-1B visa holders and other non-permanent residents would be banned from taking out new FHA mortgages.

The effect was swift. According to Optimal Blue data provided to ResiClub, non-permanent residents—including H-1B visa holders—saw their share of FHA mortgage locks crater from 3.8% in September 2024 to just 0.2% in September 2025. That sharp pullback followed a steady rise in their FHA participation between 2020 and 2024. As far as ResiClub can tell, there hasn’t been a comparable policy shift in the conventional GSE space—at least not yet. That means the FHA channel, in particular, absorbed this policy shock.

The takeaway

Since the Pandemic Housing Boom ended, America's largest homebuilders have leaned more heavily on FHA buyers to keep sales moving. Some of that is a reversion to the mean after an unusual boom-era buyer mix, but much of it reflects stretched affordability and a builder sales machine, through in-house lenders, seller-paid buydowns, and FHA's looser qualifying standards, that is well suited to pulling marginal buyers across the finish line. That strategy has helped builders sustain volume in a soft market. But it also ties them more closely to the segment of the mortgage market showing the most strain. The national labor market remains solid-ish and overall mortgage performance is still historically healthy, so this doesn't spell imminent trouble. But if stress continues to build among FHA borrowers, the pressure is most likely to show up first at the bottom of the for-sale market. We'll keep an eye on it.

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