PMI Mortgage Center

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. Lenders feel safer with FHA because the FHA will pay off the loan should a 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. 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. FHA mortgage rates in today’s market dictate that on a 30-year fixed loan at 6 percent, you will have to pay 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.) There are a few reasons why an FHA loan could your best option as a borrower. 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. 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. 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 will get financed or not, and you have bad credit or a bankruptcy on record, then you should try debt consolidation and/or get a debt management program. 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.

Usually, a much lower than average down payment is required for an FHA 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 of those U.S. government programs that actually does what it’s intended to do.