April 13, 2018
What is my FHA home loan interest rate? Borrowers want to know because it affects the overall cost of the mortgage for the lifetime of the loan, and when you are buying a home with an FHA mortgage (or any other kind of home loan) it’s important to think long-term; knowing how the interest rate affects your loan costs is a detail worth learning more about.
But interest rates on FHA home loans are not (to the surprise of some) set or regulated by the FHA or HUD. The only real guidelines for basic FHA loan interest rates are that the rates must be applied in a manner that is reasonable and “customary” for the housing market you are buying in.
The FHA does have regulations on how Adjustable Rate Mortgages work-the rules for this type of home loan govern how often and how much the interest rates may change within a given time frame for the loan.
But even the FHA loan rules in this area do not stipulate how much interest can be charged initially by the lender-this is something borrower and lender must negotiate between themselves.
What determines your FHA home loan or refinance loan interest rate?
It’s easy to assume that just one or two factors might apply, but the truth is that market conditions on any give day play a role in determining interest rates, but your credit history and FICO scores may also play a part in what the lender offers.
If a borrower’s FICO scores indicate he is not a strong credit risk, the borrower may be offered a higher interest rate. If a borrower’s credit history indicates reliable payment history and strong FICO scores, a more competitive rate may be offered.
In any case, lender standards will play an important role in the rates you have access to, and for how long.
Interest rates on FHA home loans can change daily, which is one reason why the FHA loan interest rate lock commitment is an important thing to know about.
The rate lock commitment between borrower and lender protects the serious buyer from interest rate adjustments or fluctuations during the lock-in period and can help the loan get to closing time with that interest rate provided the lock-in period does not expire before then.
If circumstances delay closing and you risk hitting the end of the rate lock commitment before you can close the deal, have a discussion with your loan officer about options to protect yourself from changing rates.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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