FHA Mortgage Rates and Today’s Market
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.
Giving needy families the opportunity to purchase homes, President Bush convinced Congress in 2006 to pass a proposal for the FHA to modernize they way they function and approve loans. At the time, the FHA mortgage rate was only 5.5%. (Here’s a quick aside is for those looking to compare home mortgage rates. In today’s market, current FHA mortgage rates dictate that the interest rate is 6% for a 30-year fixed loan with 1.875 points. 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. Average and even above average credit just won’t be enough to get a loan now. 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’re really concerned about whether you will get financed or not, and you have bad credit or a bankruptcy on record, then you should try consumer credit counseling and/or get a debt management plan. Typically, people can get help with making the right steps to reduce their debt-to-income ratio, not to mention potentially improving their credit score.
Typically, FHA loans require a much smaller than typical down payment to get the loan. This is usually seen as an added benefit for many borrowers. Even for those that have more money to use as a down payment, it can often make more sense to use that money for growth by finding investments that give a good return.
FHA loans are meant to help responsible and deserving individuals purchase their very own homes. This is one of those U.S. government programs that actually does what it’s intended to do.