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.

Giving needy families the opportunity to purchase homes, President Bush convinced Congress in 2006 to pass a proposal for the FHA to modernize they way they function and approve loans. When the proposal was passed, the FHA mortgage was just 5.5 percent. (Here’s a quick peek at the rates for those looking to compare mortgage loans. 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 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 have become far more selective about who they lend to, thanks to the sub-prime loan fallout. Simply having average or slightly better than average credit isn’t enough. 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.

Bankruptcy can be one other thing that impairs people. 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 services 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.

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 government programs that actually works pretty well.

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