FHA Mortgage Rates

FHA Mortgage Rates

When looking for a household loan, you may have heard about an FHA insured loan. Backed by the Federal Housing Administration, these mortgage loans allow Americans in lower income brackets to borrow the money required for a house that they would otherwise be unable to afford.

How does a FHA Mortgage work?

If you can’t afford a down payment on your home, then you may want to consider an FHA insured loan. If your application to the FHA is successful, then they will insure your loan, meaning that much of the risk is taken away from the lender. In desperate financial times, like the Great Depression, this was seen as an effective way to stimulate the economy.

Who does the FHA primarily work with?

The FHA works with people from a number of different walks of life. However, they are particularly useful for recent college graduates or newlyweds, neither of which may have been able to save up enough money for a down payment on a home. So, while these people may easily be able to pay for monthly mortgage payments in the future, it could take a significant amount of time before they are able to save up enough money to afford a down payment.

Keep in mind that FHA mortgage rates will not work for everybody. Before insuring a loan, the FHA will conduct a close analysis of your financial situation in order to determine your viability as a lender. And, if they decide that you cannot afford the cost of a home in the future, then your application will be denied. Of course, this is generally a good thing for you, as owning a home that you cannot afford could lead to bankruptcy. Keep in mind that the FHA’s financial analysis will look at more than just your income level and credit score, so don’t let that deter you from looking at FHA mortgage rates today.

What are FHA mortgage rates?

Just like any loan, FHA insurance comes with its own interest rates. Thankfully, these FHA mortgage rates are the same as one you would get from a conventional bank, and are generally quite competitive. Put simply, the FHA doesn’t actually lend you money. Instead, they insure your loan. Usually this insurance comes with its own monthly payment, which may need to be factored into the cost. In fact, in most cases, this mortgage insurance premium is covered by the lender, which means that the borrower may only pay a small monthly premium in addition to their standard monthly payment.

For example, under the popular 203(b) loan, borrowers are locked into a fixed rate, and are able to finance up to 97 percent of the cost of their home. So, while many down payments require a 5% or 10% payment at purchase, these mortgages allow you to avoid much of that cost. This loan also allows a third-party to cover the remaining closing costs, which can be expensive for anybody in a lower income bracket.

FHA Mortgage Summary

FHA Mortgage SummaryTo sum up, the FHA and FHA mortgage rates are a good thing for prospective home buyers everywhere. While a poor financial history or the lack of a credit score may prevent you from borrowing from traditional institutions, the FHA looks deeper into your ability to repay a loan, and makes its decision based on that information. For many people, this could be the difference between owning a home or renting for the rest of their lives.