What’s Happening with Today’s Market and FHA Mortgages?
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. The FHA essentially provides a guarantee that a loan will be repaid in the event of borrower 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. When the proposal was passed, the FHA mortgage was just 5.5%. (Here’s a quick aside is for those looking to compare mortgage rates. FHA mortgage rates in today’s market dictate that on a 30 year fixed loan at 6%, you will have to pay 1.875 points. You can also get a 6% interest rate for a 15-year fixed loan, but the points will only be 1.25.) 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. Because of the sub-prime lending problem, many lenders have become far more strict about who they lend to. Simply having average or slightly better than average credit isn’t enough. 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 be one other thing that impairs people. 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 debt consolidation services and/or get a debt management plan. Often they can help people immediately improve their credit, as well as help make sure that the correct steps and measures are taken to lower debt-to-income ratios.
FHA mortgages usually don’t require as large a down payment as is required with other loan types. Some borrowers will see this as an added incentive. 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 of those U.S. government programs that actually does what it’s intended to do.
