April 4, 2014
A reader asks, “Is there a current guideline for the expected interest rate under the short refi for a home 450k to 500k. My note holder indicated approx 5% interest, 6.5 APR which seems a little high given the current rates for Jumbos.”
“Also, for those interested should note my Tax Rep indicated the “forgiven debt” is no longer tax exempt (meaning the next year they amount forgiven would be taxed at you income+forgiven debt level). Have you heard if the Fed is talking about re-instating? This could be a substantial one time out of pocket tax owed the next year.”
The first part of this reader question would seem to imply to some that the FHA might regulate or set interest rates.
But that’s a misconception almost as common as the one that holds that the FHA itself somehow lends money to borrowers. The truth is that the FHA does not set or regulate interest rates–these must be negotiated between the borrower and the lender.
Any interest rates on FHA loans would have to be discussed with the lender including the current going rate, mortgage rate locks, discount points, and related issues.
The mortgage loan rate you get today may not be the same one offered tomorrow, depending on market conditions and other factors. Borrowers should shop around for an interest rate that’s the most competitive or advantageous to them but your access to mortgage rates within a certain range may depend on your FICO scores and loan repayment history.
Your experience with one lender may not be the same at another, again depending on factors such as your financial qualifications.
The second part of this reader question is a tax issue that we’re unable to comment on as it falls outside the scope of this website–we discuss FHA loans and the rules for those loans. Tax questions are best left to tax experts, so we decline to comment on them here.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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