FHA loans were made for times like this.

The Federal Housing Administration is backing mortgages at a record rate in light of the lingering recession. FHA loans have been attractive to first-time homebuyers and low- to middle-income families for more than 70 years. Today, they�re more popular than ever, as prospective homeowners are turning to FHA loans because of their flexibility and minimal costs.

One of the biggest advantages FHA loans have over conventional mortgages revolves around qualification and credit. The national economic climate has only tightened the credit market and forced mortgage lenders to re-evaluate their underwriting practices.

FHA loans make home ownership possible for scores of Americans who might not otherwise qualify.

The FHA does not use a credit score as a program qualifier. But the agency also does not issue loans � it backs them. That ultimately means that the lenders who work with the FHA may take an applicant�s financial history into account.

Prospective buyers without sterling credit can still qualify for FHA loans in this climate. Buyers with scores as low as 620 can obtain favorable mortgage rates on an FHA loan. Many traditional residential lenders now won�t consider applicants with credit scores below 680.

Credit score, overall financial health and down payment can all impact the mortgage rate on an FHA loan. These minimal-cost loans require only a 3.5 percent down payment, but prospective buyers with good credit and a double-digit down payment would only help to improve loan terms. But buyers with spotty credit can still obtain a home loan with slightly above-average rates through the FHA.

Homebuyers should keep in mind that the FHA has mandatory loan limits depending on where your home is located.

With a conventional loan, some prospective buyers with excellent credit can obtain lower rates than an FHA loan can provide. In general, conventional applicants need a score of at least 640 to be considered for a traditional conforming loan. But those looking for the best rate available on a conventional mortgage should expect to have a credit score of at least 740.