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FHA Loan Interest Rates: January 2021

Mortgage Rate Trends

The previous year was historic in many ways and the performance of home loan mortgage rates was no exception. They moved decisively below the three percent range and stayed there, moving higher occasionally but stubbornly resisting certain norms however temporarily.

In 2021, people who write about mortgage loan interest rates note that while not directly tied to the performance of U.S.Treasuries, mortgage rates do trend together with Treasuries (typically speaking).

In the opening month of the new year mortgage rates have not moved directly in tandem with the ups and downs of Treasuries, but that a correction of sorts has been predicted even before New Year’s Eve. That correction is coming–it’s safe to assume higher rates are in the future.

What we don’t know is how long it will take to come around.

Market watchers note that FHA mortgage loan interest rates are still low, and still below the three percent zone. But you’ll find people writing about having a false sense of security about this in some sectors; if you expect the rates to remain as low in 2021 as they were in 2020, you may be disappointed.  

Because of this potential to rise above the three percent range, there are borrowers who are trying to decide about moving forward on a loan application may want to consider the possibility of higher rates in the future when deciding to wait or act on the loan.

But for those who aren’t really in a position to file loan paperwork, applying now won’t help. Even with low rates, borrowers who haven’t prepared their credit, down payment money, and closing costs may find themselves having to pass up the moment when rates were so low. Why? Because if you simply aren’t ready for the loan, it’s likely you won’t be approved for it in the first place.

And if you have all the money saved but you haven’t worked on your credit? It’s the same problem all over again–loan approval depends on your having details worked out, working on your credit, and saving the money you need to pay the up front costs of the loan.

Do you know why working on your credit plays such an important role in this process? Those rushing to get ready for a home loan because of historically low interest rates, mustn’t forget that a borrower’s FICO is a factor in the interest rate your participating FHA lender will offer you. If your credit isn’t ready for the loan, the low rates issue could become moot.

Work on and monitor your credit at least 12 months ahead of time. You also need to establish a 12 month-or-better record of on-time payments, which is something your lender NEEDS to see.

Yes, FHA mortgage loan interest rates are likely to rise this year, and we may even witness them climb above 3.0%. Are you ready or close to being ready to apply for the loan? Discuss your needs with a participating FHA lender–talk to them about what remains to be done to get you started on the road to homeownership.

Joe Wallace - Staff Writer

By Joe Wallace

January 20, 2021

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 for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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