What You Need To Know About Fha Loan Rate

The Federal Housing Administration, or FHA as it is commonly known

, is a government mortgage insurer. It operates under the United States Department of Housing and Urban Development (HUD). FHA does not offer or make loans but rather it guarantees or insures mortgage loans provided by private lenders. It provides insurance on homes and hospital loans made by lenders in the United States and its territories. Lenders must be FHA-approved in order for their mortgages to be eligible for FHA insurance. FHA-insured loans have lesser risk on the part of the lenders because FHA will assure the payment of the loan in the event that the borrower defaults on his loan.

The FHA loan rate is based on the prevailing interest rate in the market. The lenders usually have updated charts that show the FHA loan rate for mortgages that will be insured by the FHA. The FHA loan rate as of June 23, 2010 is at around 4.25 percent for 30 year fixed rate mortgage and around 4 percent for the 15 year fixed rate mortgage. The current interest rates are historically low and are very attractive to borrowers as they can now have the opportunity to take advantage of these low interest rates on mortgages and cash loans. However, those who have bad or low credit score could not expect to lock into mortgage interest rate at low levels. Low rates are normally given only to those with high or good credit score.

FHA has been in existence for more than seventy years now and since the implementation of FHA home loans, they have insured more than 37 million of home mortgages and more than 47,000 multi-family project mortgages. This makes FHA the biggest government mortgage insurer in the world. Currently, the FHA has insured 6.1 million single-family mortgages and 13,000 multi-family projects. FHA had been providing mortgage insurances on multi-family, single family, manufacture homes mortgages and hospital loans.

FHA is a very big help to those who would like to own a home but do not have yet the money they need for the purchase, like young people who are newlyweds, new college graduates and even students. FHAs mortgage insurance makes individuals to qualify for loan even though they had been recently denied for a loan for failing to provide conventional loan requirements. Because of the mortgage insurance, lenders willingly extend loans to borrowers even to those whose home loan had been denied previously by conventional underwriting guidelines. FHA also allows individuals whose credit has suffered because of foreclosure or bankruptcy.

Owning a home becomes more affordable to moderate and low-income individuals and families because of the FHA mortgage insurance programs. This is made possible by lowering the costs of processing of their mortgage loans. In order to prevent borrowers from trying to get a home which they cannot afford, FHA had put in place the debt ratios for each state in which the home to be purchased is located. This is done by analyzing thoroughly the income and monthly expenses. With the successful implementation of FHA mortgage loan insurance programs, home ownership rate rise steadily in America.

by: Lam Bong

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