October 21, 2014
Is now the right time to refinance your FHA or conventional home loan? Is now the best time to look into a new purchase FHA mortgage? Recent FHA loan rate trends do seem to point that way with rates having fallen into 16-month lows recently.
Mortgage rates, as we reported last week, took a big move lower pushing FHA mortgage loan interest rates down from the previously long-held 3.75% range down to 3.5% (best execution). That means borrowers who have outstanding financial qualifications may find rates at or near these numbers available, while borrowers who may not necessarily qualify for the very best rates may also find lower-than-usual FHA rates while this trend lasts.
Monday’s FHA interest rate trends had the recent move to 3.5% (a “best execution” rate available for the most well-qualified borrowers) back for another day. It has been a trend for FHA rates to find a “comfort zone” and stay there until conditions warrant a change, but it’s not certain yet whether 3.5% is a flash in the pan or if it’s here for an extended period of time the way 3.75% previously was this summer.
One question some ask about times like this is whether it’s “safe” to lock in an interest rate now with the lender or to “float” and wait a day or two longer in hopes that the rates might drop even further. Depending on the day, the condition of the markets, and other factors it may or may not carry added risk to do so, but one thing is sure–for many borrowers, when mortgage rates move to the lows we’ve seen in the last week, it certainly doesn’t hurt to lock in an interest rate commitment when those lows haven’t been seen in over a year.
The most important thing a borrower can do when making such a choice is to ask a lot of questions of the lender–is it more advantageous to cut your risk of those numbers getting pushed higher tomorrow? Or does it make sense in the light of current trends to take a chance and hope for an even better rate tomorrow? Only the borrower can make this choice and an informed decision is the best kind to make.
One thing you should know about mortgage rate trends–they are subject to change at any time based on investor behavior, breaking news, sometimes even changes in the weather (remember the “polar vortex? That can and did affect mortgage rates to a certain extend according to some market watchers). Never assume that today’s trend is guaranteed tomorrow.
Talk to a participating FHA lender about your options for “floating” or “locking” an FHA interest rate commitment and carefully consider the advice you get.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for moderation.
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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