What do you need to know about FHA loan rates? The interest rate on your mortgage is an important variable you’ll want to think about early in your planning stages.
If you don’t run the numbers on how much your mortgage will cost over the lifetime of the loan, you’re at a serious disadvantage when it comes to planning.
Calculating the cost of the loan itself is not the same as calculating your monthly mortgage payment. You’ll want to know the fees and expenses you need to pay up front, but you’ll also want to know how much your loan costs you when the interest rate is applied.
How much does your loan cost you each year? Each decade? What is the total cost of the loan once it has been fully paid off, assuming you don’t refinance or sell?
Here are some important things to remember about FHA loan rates.
FHA Loan Rates Will Vary From Lender To Lender
That is the obvious advice you will get from any finance blog. What is NOT so obvious? Lenders price their loans differently and they assign interest rates differently, too.
The mortgage rate you get offered from one lender might seem lower and therefore more attractive than others.
But you need to determine whether or not that rate is offered at the expense of higher closing costs. Ask the lender to explain whether or not that is true for the rates you seek and compare that with other mortgage lenders.
When rates change, some lenders might not adjust their and pass the savings on in the form of lower closing costs. And your lender may offer you a lower set of closing costs at the expense of a higher rate.
FHA Rates Are NOT Set Or Regulated By The FHA
Again, that is Mortgage Loans 101 type information you’ll see on any finance blog. What is not so well-known? Mortgage rates are determined by current market conditions, which are affected by certain investment trends.
Not all investment markets affect mortgage rates, but investor behavior does play a part.
A savvy borrower pays attention to market forces–when investors are fleeing for save-haven investments (bonds and Treasuries) it can influence mortgage rates.
Do you hear about investor trends running toward more risk or more security? Take heed and watch what that does to mortgage rates for future reference.
Housing Trends Matter
Also, smart house hunters pay attention to housing supply and demand trends. In cases where there is high demand and low supply, sale prices can go higher and higher.
That means that yesterday’s interest rates for a home loan, if applied today, would mean a higher overall cost of the loan over its lifetime because the loan amount itself is higher.
So even if your interest rate remains the same, the house that increases in price from $250k to $300K would be more expensive over the long haul.