August 15, 2023
When you apply for an FHA loan, one of the most important questions to ask is about interest rates. You want to know how much, over how long, and what options are open to you in terms of fixed or adjustable-rate mortgages.
FHA loan rules printed in the FHA Single-Family Lender’s Handbook include a section about interest rates. While the FHA does not set or regulate the interest rates on FHA mortgages.
That’s between the lender and the borrower.
FHA rules do require the rates to be customary and reasonable but the rulebook does NOT list numbers.
FHA loan interest rate policy is basically a hands-off policy. FHA loan rules say that typically under “all currently active FHA single-family mortgage insurance programs,” the borrower and the lender negotiate the interest rate.
Additionally, FHA loan rules include instructions for the lender on handling the fees associated with the interest rate lock, which protects the borrower from changes in the interest rate on the way to closing the loan for a specific number of days.
Lenders are allowed under FHA loan rules to charge a commitment fee to guarantee in writing, “the interest rate and any discount points for a specific period of time,” or to limit the extent to which the interest rate or discount points may change.
Interest rate locks are for a specified period of time and you realistically can’t enter into a rate lock agreement with the lender with an open-ended date.
If the rate lock expires before you make it to closing day, it may be necessary to renegotiate a rate lock.
Interest rate locks can protect you from fluctuating interest rates but you’ll need ensure the rate lock can last until closing day or what to do if that is not possible due to unforseen circumstances.
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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