What’s Happening with FHA Mortgage Rates Today?

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.

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 rates. In today's market, current FHA mortgage rates dictate that for a 30-year fixed loan with 1.875 points, the interest rate is 6%. 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, 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. 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 can also be a huge perk for some borrowers. 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.

The FHA is designed to help people, who are deserving and responsible, buy their own homes. This is one government programs that actually works pretty well.