Home buyers using the Federal Housing Administration's (FHA) single-family mortgage insurance program tend to be younger, less affluent and purchase lower-priced homes than buyers using privately insured, conventional financing.

FHA is vital to people trying to buy their first homes. Many users of this program don't fit the tougher qualifications imposed for privately insured mortgages. FHA generally serves a different niche of the home buying market than private mortgage insurers.

The significant role FHA has in helping entry-level buyers purchase homes was highlighted in a 1992 survey of mortgage lending activity released by the National Association of Realtors.

According to the survey, 67 percent of the buyers using the FHA program in 1992 were people purchasing their first homes. In contrast, 56 percent of the borrowers using fixed-rate conventional financing were repeat buyers and 68 percent of those using adjustable-rate conventional financing were trading up.

Approximately 2,000 Realtors nationwide were surveyed for the report, which covered financing of closed transactions.

Although interest rates charged for the government and private mortgage programs are similar, the more lenient underwriting guidelines and lower down payment requirements of FHA make it more affordable than most conventional financing.

The report shows that in 1992, FHA borrowers paid an average sales price of $72,800 for their homes, and obtained a loan for $68,600. The median income of FHA buyers was $34,300 and the median age was 31 years. "FHA is an important financing tool. As Realtors, one of our goals is to keep the FHA program accessible and affordable.

NAR supported legislation to make the FHA program more accessible. One provision lifted a restriction imposed by the U.S. Department of Housing and Urban Development to limit the amount of closing costs that could be financed as part of an FHA-insured loan. This restriction had added hundreds of dollars to buyers' closing costs and was causing FHA to lose business.

FHA's mortgage insurance limit was also adjusted to more accurately reflect local housing costs. The legislation changed the limit to 95 percent of an area's median price, and raised the maximum from $124,875 to $151,725. This adjustment will allow FHA to be used more in high-cost housing markets.

The survey showed that the average sales price for homes purchased in 1992 with a fixed-rate, 30-year, conventional loan was $124,400 and the average loan amount was $103,200. Buyers using one-year, adjustable-rate mortgages paid an average of $154,400 for their homes and financed an average of $123,400. The median income of borrowers with fixed-rate, 30-year mortgages was $46,400; for borrowers of one-year adjustable-rate mortgages (ARMS), the median income was $48,800. The median age of fixed-rate conventional borrowers was 35 years; for ARM borrowers, it was 36.

The report also examined use of the home loan guaranty program provided by the Department of Veterans Affairs (DVA). Fifty-two percent of those using the DVA program in 1992 were first-time buyers. DVA borrowers paid an average of $97,400, with a loan of $93,000. The median income for DVA users was $46,100, and the median age was 35.

Previously-owned, single-family homes dominated the purchases by all buyers last year, but they were favored most by FHA and DVA borrowers. Ninety-two percent of the FHA users and 91 percent of the DVA users purchased existing, detached homes.

More than half the homes included in the survey were purchased in the suburbs of major metropolitan areas. The homes in each financing category had an average of three bedrooms and two baths, but square footage for the homes and lot sizes varied. The median size of homes purchased with FHA financing was 1,300 square feet, and the median lot size was 8,700 square feet. The median size of homes purchased with conventional financing was 1,600 square feet, and the median lot size ranged between 10,600 square feet and 10,800 square feet. The median size for homes purchased with DVA financing was 1,700 square feet and the median lot size was 10,800 square feet.

The survey also included a section examining mortgage financing activity in the fall of 1992. It found that repeat buyers returned to the housing market with growing frequency throughout 1992, with the largest percentage entering last fall. The share of trade-up buyers rose from 55 percent in the spring of 1992 to 64 percent in the fall.

Existing-home owners, taking advantage of increased affordability, moved up the housing ladder, trading up to more expensive homes. Loans made to repeat home buyers continued to increase over the year.