MassHousing, the state’s affordable housing bank, provided a record-breaking $965.3 million in financing in fiscal year 2012 as thousands of homeowners flocked to its new program for low-cost, low down payment loans that don’t require mortgage insurance.

Lending for the Massachusetts Housing Finance Agency, an indpendently funded, quasi-public agency, increased by more than 21 percent in the 12 months following June 30, 2011, compared with the previous fiscal year, the agency said Monday.

Agency officials said the increase is largely due the innovative program that helped some 2,422 borrowers qualify for $588.8 million in loans since January. The program is meant to help eligible low-to-middle income borrowers refinance or purchase homes with a downpayment of as little as 3 percent and still avoid paying mortgage insurance, which can add more than $1,000 to a borrower’s annual costs.

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Normally, homeowners have to pay mortgage insurance if they put less than 20 percent cash down on their home.

“The no-mortgage insurance loan is the most popular loan we’ve ever offered, and has been a hit not only with homebuyers but also homeowners who can refinance at a lower rate, reduce their monthly payment and send additional money back into the economy,” said MassHousing executive director Tom Gleason “Since we first made it available in January, our weekly lending to homebuyers and homeowners has quadrupled and shows no sign of letting up.”

Peter Milewski, director of the MassHousing mortgage insurance fund, said the bank launched the program with mortgage giant Fannie Mae to keep up with an increasing number of loan applications and “limited availability” of mortgage insurance. To cover additional risks, homeowners who receive the loans must pay a slightly higher interest rate.

Fannie Mae spokesman Andrew Wilson said the program works because borrowers are carefully screened and counseled about the mortgages they receive to assure they can pay back their loans. Fannie Mae and MassHousing share the financial risk if a borrower defaults.

“You are making loans that people can afford you are making loans that people can understand,’’ he said.

MassHousing also provided $334.4 million to developers or apartment owners to build six new residential developments and preserve 22 existing apartment complexes throughout the state. It also approved $20 million from its mortgage insurance fund to insure 93 affordable housing loans made through community banks, the agency said.

MassHousing raises the money it loans by selling bonds.

In a statement, Governor Deval Patrick lauded the funding efforts.

“Creating affordable housing helps to generate jobs, grow local businessiness and strengthen our communities,’’ he said.