July 23, 2018
Which FHA lender offers the lowest interest rates? This is a question on the minds of all FHA borrowers, whether you are looking for an FHA new purchase loan, an FHA cash-out refinance, or even an FHA Reverse Mortgage. The answer to this question, however, is more complicated than “Lender X offers the best rates”.
It Pays To Shop Around For FHA Loan Interest Rates
If you need to know the lowest interest rate offered by a group of lenders, you will need to check with each participating lender. But there’s a catch-interest rates fluctuate, and can change daily. The rates you see today may not apply tomorrow, and those interest rates are listed without reference to a borrower’s credit rating and credit history.
Shopping around for an interest rate does more good the closer you are to committing to the purchase of a home with an FHA loan.
But you can get a general idea about how your chosen lenders price their home loan products ahead of time if you understand that today’s rated aren’t guaranteed tomorrow unless you enter into a commitment with the lender.
FHA Loan Interest Rates: “Best Execution”
The FHA loan interest rates you see advertised online or at the lender’s brick-n-mortar facility are generally those rates defined as “best execution”, or interest rates that assume a borrower with ideal credit scores and credit history. The actual rate you are offered will depend greatly on your credit rating.
Can I Get An FHA Loan Interest Rate Commitment Today?
There are multiple reasons why you can’t get a firm commitment on an interest rate for your FHA loan today unless you are entering into a commitment with the lender. One of those reasons involves the credit issues mentioned above, and the ever-changing nature of mortgage rates is another.
You can enter into an interest rate lock commitment with the lender when you are ready to commit to the mortgage. An FHA home loan permits you and the lender to agree to a specific interest rate; that agreement is valid for a limited time. If your home loan is delayed and the interest rate lock commitment period expires, you may need to renegotiate with the lender.
Does The Interest Rate Lock Cost Me Money?
FHA loan rules state that the lender is permitted to charge a fee for an interest rate lock commitment. The cost and procedures for this will vary depending on the lender.
HUD 4000.1 instructs the lender on interest rate lock fees, “The Mortgagee may charge the Borrower lock-in and rate lock fees only if the Mortgagee provides a lock-in or commitment agreement guaranteeing the interest rate and/or discount points for a period of not less than 15 Days prior to the anticipated closing.”
As you can see, there is some consumer protection for the interest rate lock period-15 days is the minimum amount of time that the commitment may be set for.
There are plenty of variables when it comes to getting the lowest FHA loan interest rate, which is one reason it pays to do plenty of research ahead of time when exploring your options.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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