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As credit markets tumble, borrowers are seeking safe shelter in loans backed by the Federal Housing Administration.

“It is the way to go,” said Jennifer Kneib, branch manager at First Horizon Home Loans, now MetLife Home Loans. “It’s a better, easier and cheaper route for people.”

While FHA does not make mortgage loans directly, it insures those that are made by private lenders, making them more appealing.

“FHA is doing very well,” said Lemar Wooley, a spokesman for the U.S. Department of Housing and Urban Development. “Its share of the overall mortgage market has gone from just a little over 4 percent in 2007 to almost 14 percent today.”

Borrowers and lenders are riding out economic turmoil as interest rates continue to fluctuate. Mortgages rates on all types of loans were lower this week, according to Freddie Mac. FHA loans are attractive to borrowers because there are no income limits, a low down payment and lenders look at the entire credit picture and not just the credit score.

A conventional home loan wasn’t an option for Kevin Binder and Jamie Penland. Less than perfect credit, a fair debt-to-income ration and not a lot of savings have kept the thirty-something couple from owning their dream home.

“We’ve worked hard to eliminate a lot of our bad debt to do this,” Ms. Penland said of applying for their first home loan.

But the economy has taken its toll on the housing market and while FHA may be insulated, it’s not immune. Ms. Kneib said that she has seen a huge increase in the number of FHA loans in the past three to four months.

In March, the maximum loan amount for FHA borrowers in Buchanan County increased to $271,050 for a single family household. As of Jan. 1, the down payment required will increase from 3 percent to 3.5 percent.

Some risk-based pricing is associated with FHA home loans, though. Ms. Kneib said that interest rates will now vary depending on a borrower’s credit score.

“Most lenders like to see a 580 or better credit score,” she said.

On Wednesday, the interest rate for an FHA borrower with a credit score of at least 620 was 6.25 percent.

Besides FHA loans, lenders have available other conventional loans that require just 3 percent down. Ms. Kneib said that those loans can have stricter guidelines when it comes to credit scores, so approval is not as easy.

When a borrower’s loan amount is at 90 percent, the more reasonable approach would be a conventional loan. But that’s an idea that is quickly changing.

“Standard conventional loans won’t approve them. FHA has just as competitive interest rates as conventional rates,” Ms. Kneib said.

The FHASecure, FHA’s refinance program, was recently expanded to allow even more troubled homeowners to qualify for FHA-insured loan, said Mr. Wooley. Ms. Kneib said that her office hasn’t done too many of the FHASecure loans.

Since its inception in 1934, FHA has insured almost 35 million mortgages, according to Mr. Wooley. There are 4 million loans insured currently.

The Bush administration added even more insulation for those struggling with a mortgage payment. The Hope for Homeowners Program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by the FHA.

The Hope for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008 and ends Sept. 30, 2011.

Mr. Wooley said that as of last week, more than 50 lenders have signed up to participate in the program.

The program is available only to owner-occupants and will offer 30-year fixed-rate mortgages, so the borrower’s last payment will be the same as the first payment. In many cases, to avoid what would be an even costlier foreclosure, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

“This could be good for a lot of borrowers,” Mr. Wooley said.

Business reporter Jennifer Hall can be reached at jennhall@npgco.com.