Federal Housing Administration loans have been an increasingly popular choice for homeowners since 2009. One of the reasons for this is that they have sported consistently low rates since their beginning. FHA rates today are still scraping rock bottom while the cost of homes is on the rise. If you want to take advantage of the market and get your home for less than its appraised value, now is the time to act. Read on to find out how to make the whole process work for you.
Determining Your Interest Rate
The mortgage rate you will receive is based on how you stack up against the federal requirements. If you are considered risky business your rate is bound to be high, in an effort to protect the administration from loss and expense. The country suffered 2.8 million foreclosures in the year of 2009, many of which were made on mortgages issued to lenders with a high amount of debt and a dubious credit history. When it comes to government loans, a foreclosure means that the government must pay the balance of the loan to the lender, since they are the ones that required them to lend to underqualified persons in the first place. Thus foreclosures do not just affect one bank or corporation, but the entire country at large. There is a huge amount of risk involved when you factor in the number of federally-backed mortgages that are closing every day.
This phenomenon is the main reason why conventional loans are so difficult to qualify for. Lenders take a large chunk of the loan upfront (down payments around 20%) and expect perfect credit history of their applicants. This is far out of reach for the majority of US citizens today, which is why we have the option of a federal loan and a down payment of 3.5%. Couple this with the fact that FHA rates today are comparable, in fact a little lower, than that of conventional mortgages, and you can see what all the hype is about.
A major benefit is that the guidelines are also less strict. Credit score carries much less weight here than it would in a traditional mortgage. Loans have been approved for borrowers with scores and low as 580, and even those who have so/so credit will qualify for a low interest rate.
Taking Advantage of FHA Rates Today
The way for any borrower to achieve a low mortgage rate is to shop! Get quotes from several different lenders, interview them about the process of closing a loan, and don’t forget to compare origination fees – these vary significantly from lender to lender. In today’s modern age, this process has been made quite simple. Almost every bank and lender provides internet services that can tell you the rates you qualify for and estimate any fees and closing costs. Most important in choosing a lender is that you verify their FHA approval. The good news is that most of them are certified. In today’s economy, no one can afford to lose business. When the majority of home loans are going to the government, you have to get on board.
Once you have chosen your loan officer, it is time to send in some paperwork. To get started, you will need your most recent two tax returns, paystubs, savings and checking account statements, other loan statements and credit card bills. Your officer will use these documents to determine the ratio of your total monthly obligation in comparison to your gross monthly income. To qualify you must come in at or below 36%.
Next the lender will run a credit check to find out if you qualify and what interest rate you will pay. The higher your score is, the lower your rate will be. If you are a person that usually pays their bills on time and has a low amount of revolving debt (such as you find with credit cards), you most likely have a strong credit score. Once approved, paperwork is signed, closing costs are paid, and you get the green light to purchase your new home!
There are many factors when it comes to qualifying for a federal loan. What are your FHA rates today? It all depends on how qualified you are. If you have proven yourself capable and consistent when it comes to handling debt, you are an excellent candidate to take advantage of the minimal down payment and low financing costs that make the Federal Housing Administration so very popular among today’s home buyers.
For those wanting to refinace heres another good way to take advantage of FHA Rates today!