November 7, 2011
We love fielding reader questions–there’s nothing better than knowing that our posts are directly addressing the issues and answers FHA borrowers seek. One recent set of questions from readers last week includes a variety of queries about FHA loan interest rates.
“On either the 203K or the Title I type loans, what is the average interest rate that is usually given? I am sure they vary from lender and from state, but any type of ballpark amount is appreciated.”
The reader is correct that interest rates on FHA home loans vary from lender to lender–depending on the market in a given area and other variables, if you want to buy a home with an FHA mortgage it’s important to shop around for the best rates and terms. It’s important to remember that the FHA does not set or govern interest rates, except to require that lenders offer FHA loans with terms that are “reasonable and customary” with standard market practices.
Unfortunately, it is impossible to issue advice on “standard” interest rates on FHA loans for a very important reason–FHA loan interest rates also can depend on the borrower’s ability to qualify for the most competitive rates. A borrower with excellent credit may qualify for a far better interest rate than one who has made mistakes with credit in the past but have credit good enough to qualify for an FHA mortgage.
The borrower with credit on the mend might not get the same type of interest rate that the borrower with spotless credit has, so in the parlance of the automobile industry, “your mileage may vary”. The best way to get a handle on interest rates in your market is to contact several lenders and ask, or try pre-qualifying (where applicable) to see what you may be eligible for in terms of a new purchase or FHA refinance loan.
If you have a question about FHA loans, please feel free to ask us by leaving a comment at the end of any post on the site.
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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