The State of FHA Mortgages Today
Providing more loans than any other organization, the FHA was established in 1934 and has given loans to over 35 million borrowers. 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.
President Bush convinced Congress in 2006 to pass a proposal to modernize the FHA, which gave deserving families the opportunity to purchase homes. The mortgage rate for the FHA was just 5.5 percent when the proposal was passed. (Here’s a quick peek at the rates for those looking to compare mortgage rates. Current FHA mortgage rates 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%.) As a borrower, there are a couple reasons why an FHA loan could be your best option. First of all, you don’t have to have perfect credit to qualify for the loan. Lenders are now much more strict about who they lend to, thanks to the sub-prime lending mess. Average and even above average credit just won’t be enough to get a loan now. However, you could still get an FHA loan because other things are considered, like income and debt-to-income ratios.
One more thing that can be a problem for people is bankruptcy. Depending on other factors, people with bankruptcy can still be considered for a loan. If you are really concerned about whether you will get financed or not, and you have poor credit or a bankruptcy on record, then you need to get debt consolidation services and/or get a debt management plan. Usually people are able to improve their credit rating, as well as take the right steps to improve their debt-to-income ratio.
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.
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