What’s Happening with FHA Mortgages Today?
December 22nd, 2009
Providing more loans than any other organization, the FHA was established in 1934 and has given loans to over 35 million borrowers. Understand, though, the FHA does not actually fund your loan, it simply insures it. 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. 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 also get an interest rate of 6% for a 15-year fixed loan, but the points will only be 1.25.) An FHA loan, if you are a borrower, could be your best option, for a couple of reasons. First, to qualify for the loan you do not need to have high quality credit. Because of the sub-prime lending problem, many lenders have become far more strict about who they lend to. It just isn’t good enough to have above average, let alone average, credit. Considering other things like your income, debt-to-income ratio, and a few other things, you might still be able to qualify for an FHA loan.
One more thing that can be a problem for people is bankruptcy. People with previous bankruptcy can still be considered for FHA loans, after other things are also considered. 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 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 can also be a huge perk for some borrowers. Many people can actually benefit from the lower down payment by using the saved money as investment money that will give a return and grow over time.
When all is said and done, the FHA is meant to help responsible and deserving people purchase their own homes. This is one government programs that actually works pretty well.
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