What's Happening with Today's Market and FHA Mortgage Rates?
The FHA was established in 1934 and has since provided loans to over 35 million borrowers, which is more than any organization. But you should understand that the FHA doesn't actually give funding, it simply insures loans. FHA makes it safer for lenders to grant loans because they know that the FHA will pay off whatever is left should you default.
In 2006, President Bush was able to convince Congress to pass a modernization proposal for the FHA that made it possible for families in need to purchase homes. At the time, the FHA mortgage rate was only 5.5 percent. (Here's a quick aside is for those looking to compare home mortgage loans. FHA mortgage rates in today's market dictate that for a 30-year fixed loan with 1.875 points, the interest rate is 6%. You will only have 1.25 points for a 15-year fixed loan, but the interest rate will also be 6%.) There are a few reasons why an FHA loan could your best option as a borrower. First, to qualify for the loan you do not need to have high quality credit. Lenders have become far more selective about who they lend to, thanks to the sub-prime loan fallout. It just isn't good enough to have above average, let alone average, credit. But, you can often qualify for an FHA loan depending on your income, debt-to-income ratio, and a couple of other factors.
Bankruptcy can also be a factor that holds people back. Depending on other factors, people with bankruptcy can still be considered for a loan. If you are really concerned about whether you can secure financing, and you have poor credit or a bankruptcy on record, then you need to get credit consolidation and/or get debt management. Usually people are able to improve their credit rating, as well as take the right steps to improve their debt-to-income ratio.
Usually, a much lower than average down payment is required for an FHA loan. This is usually seen as an added benefit for many borrowers. When a larger down payment is possible, it will often make more sense to use the remaining money from the down payment as capital investment to help it grow over time.
The FHA is designed to help people, who are deserving and responsible, buy their own homes. This is one government programs that actually works pretty well.
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