What’s Happening with FHA Mortgage Rates Today?
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The FHA was founded in 1934 and has given over 35 million loans, more than any other organization existing today. 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.
President Bush convinced Congress in 2006 to pass a proposal to modernize the FHA, which gave deserving families the opportunity to purchase homes. At the time, the FHA mortgage rate was only 5.5%. (Here’s a quick aside is for those looking to compare mortgage loan 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 can also get a 6 percent 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. 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. As long as there are other favorable factors, FHA loans will still consider individuals who have a previous bankruptcy. If you’re really concerned about whether you can secure financing, and you have bad credit or a bankruptcy on record, then you should try credit consolidation and/or get debt management. 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.
Usually, a much lower than average down payment is required for an FHA loan. Some borrowers will see this as an added incentive. 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.
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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