As a potential homeowner may find it difficult to qualify for a home loan in the current real estate mortgage market. With credit markets moving in every direction, it becomes very important for those who may want to buy a home to make wise decisions. FHA loans could be the way that people get into the homes of their dream homes, safely.

Today, the FHA helps to provide insurance backing for more than one third of all homes in the United States. Just a handful of years ago, few people took advantage of these loan programs. Many saw them as something for people who were non-creditworthy. Yet, this is no longer the case. In fact, it is safer to get your home mortgage loan through these FHA programs than it is to get your loan from other methods. In addition, it may even be less expensive.

Are FHA Loans The Only Option?

Much of the credit market’s liquidity has dried up. In many situations, it has become difficult to obtain these loans. Regardless of what is happening to help encourage banks to lend, it will still be likely that only well qualified individuals will be able to get affordable home loans through conventional loans. These loans are available, but there are fewer of them receiving approval than ever before.

FHA loans are more readily available. While they are not the only game in town, they definitely are becoming the most accessible option. In some markets, 60 to 80 percent of home loans are now FHA loans. These government backed loans are simply safer for the investor. They provide a bit of extra leverage for the investor to get back some of his money should you default on your home loan. Many of these investors have been burned by the recent foreclosure mess. They want protection for their investment. FHA loans provide this type of protection.

It is important to note that FHA loans are not government loans specifically. The government does not lend to borrowers. Rather, they provide a level of insurance to the commercial lender. You will still get your loan through a commercial bank. The only difference is that there is an insurance protection for the lender. If you default, the government will refund the lender up to a certain point for their loss. This reduces the risk of the lender.

FHA loans are a good option for many homeowners because of lower interest rates. Yet, until the housing market strengthens and the credit markets thaw, these loans are going t be the biggest game in town.

With the current economic crisis in line, many individuals are wondering what they should be doing about their current mortgages. The Federal Reserve is again considering a drop in the key lending rate paid by commercial lenders to borrow money. This rate then is translated to the average consumer at a higher level, of course. Nevertheless, when this key lending rate is cut by the Fed it does translate into a lower interest rate for most all consumers. Does this mean anything to you, as a mortgage holder?

It Should

For those currently with an interest rate higher than the average rate, consider your options for refinancing.  A drop in this lending rate would likely translate into a lower interest rate available for most qualified home buyers or mortgage borrowers. If you currently have a mortgage, you could, potentially, refinance the home loan you have. This would translate into a lower monthly payment and a lower cost in the home loan totally.

Here are some numbers to consider:

Let’s say you have a mortgage loan of $150,000 and your home is appraised for at least that much. Your current interest rate is 8 percent. You are likely paying about $1100 a month. When you finish repaying your mortgage loan, you would have paid more than $246,000 worth of interest alone (not including the original borrowed $150,000.)

If interest rates drop as they should, you could see current rates fall as low as 5 percent. You refinance your $150,000 mortgage for 30 years at this new rate. Your monthly payment would drop to about $805. More importantly, over the course of the loan, you would pay a bit more than $139,800 in interest, plus the principle. As you can see, that’s a sizable difference and it is your money, after all. It is over $106,000 of your money, in fact.

What To Do

If you know that your home’s value is high enough to refinance, you should consider it. If you are unsure, you can contact any of the FHA loan specialists available to help you. Remember that even those with credit that may not be perfect can qualify for FHA loans. In addition, these loans often help you to qualify for lower down payments on standard loans and easier refinancing terms if you currently have an FHA loan.

In other words, if interest rates do drop, you should be part of that benefit.