The FHA was founded in 1934 and has given over 35 million loans, more than any other organization existing today. Just to be clear, the FHA insures your loan, it does not fund it. The FHA essentially provides a guarantee that a loan will be repaid in the event of borrower default.

President Bush convinced Congress in 2006 to pass a proposal to modernize the FHA, which gave deserving families the opportunity to purchase homes. When the proposal was passed, the FHA mortgage was just 5.5 percent. (Here’s a quick aside is for those looking to compare mortgage rates. In today’s market, current FHA mortgage rates dictate that on a 30 year fixed loan at 6 percent, you will have to pay 1.875 points. You will also get an interest rate of 6% 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 of all, you don’t have to have perfect credit to qualify for the loan. 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. But, you can often qualify for an FHA loan depending on your income, debt-to-income ratio, and a couple of other factors.

Bankruptcy can be one other thing that impairs people. People with previous bankruptcy can still be considered for FHA loans, after other things are also considered. If you are really concerned about whether you can secure financing, and you have poor credit or a bankruptcy on record, then you need to get debt consolidation and/or get a debt management plan. Usually people are able to improve their credit rating, as well as take the right steps to improve their debt-to-income ratio.

Typically, FHA loans require a much smaller than typical down payment to get the loan. Some borrowers will see this as an added incentive. Even for those that have more money to use as a down payment, it can often make more sense to use that money for growth by finding investments that give a good return.

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.