What Is An FHA Loan Rate? Simply put, the FHA loan rate is the interest rate charged on your 15 or 30-year FHA mortgage. There are some facts you should know about FHA loan rates that will make understanding them much easier.
FHA Loan Rates Are Set By The Lender
Technically speaking, the mortgage loan interest rate on your loan is something you negotiate with your loan officer. Your access to the most competitive FHA loan rates will be determined by your FICO scores and other financial qualifications, but beyond that you may have the option to buy down interest rates using discount points, which is something you and the lender should discuss as early as possible in the loan process.
We’ll come back to discount points in a moment, but it’s very helpful to know that the FHA and HUD do not set or regulate FHA loan rates other than a requirement that interest rates on these loans be “reasonable and customary” for the type of loan being negotiated in that market.
FHA loan rates can be negotiated, and one of the most common ways to deal with interest rates is for the borrower(s) to purchase discount points. These points are paid up front by the borrower and each point is 1% of the total mortgage.
Discount points should not be purchased lightly-borrowers who buy points are often those who know they will be staying in the home for the duration of the loan term rather than selling in a few years and moving on to a bigger or more desirable property.
FHA Loan Rates Vary Among Participating Lenders
Like other types of mortgage loans, FHA loan rates vary among participating lenders. You may find some lenders offering higher rates, some offering lower interest but with higher closing costs, and you may find that your FICO scores play a very important role in determining what mortgage loan interest rate is offered to you.
That means that shopping around for an FHA loan is an important part of being an informed borrower-you may find a lender willing to offer interest rates to you not available at a competing financial institution. FHA mortgage rates can change daily for a variety of reasons, so it’s best not to assume that the numbers you were quoted last week still apply unless you have gotten something in writing stating otherwise.
FHA loan rates may be offered to you in a fixed-rate mortgage loan or an adjustable rate mortgage loan-we’ll examine those two in a future blog post.