April 26, 2012
A reader asks, “If we have to wait till June 11, 2012 to refinance, can we lock in an interest rate now? Our loan was done Feb 2008, our insurance will be lowered but will the interest be at the now, low rate (below 4%)?”
One important part of negotiating an FHA home loan with a specific lender is knowing how the FHA mortgage process works. According to the rules, the Federal Housing Administration does not set the interest rates on FHA mortgages; that’s up to the borrower and the lender to work out together.
Borrowers are encouraged to shop competitively between lenders to find the best interest rate. From the FHA official site:
“First, devise a checklist for the information from each lending institution. You should include the company’s name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed. Speak with companies by phone or in person. Be sure to call every lender on the list the same day, as interest rates can fluctuate daily. In addition to doing your own research, your real estate agent may have access to a database of lender and mortgage options. Though your agent may primarily be affiliated with a particular lending institution, he or she may also be able to suggest a variety of different lender options to you.”
Once you find a lender and begin the application process, there are a variety of things that can affect the interest rate on your home loan. One is credit score and repayment history–if you have good credit you’ll be eligible for rates and terms that are more advantageous and affordable.
When it comes to refinancing loans, borrowers should never assume they can’t comparison shop for FHA refinancing the same way; borrowers are not limited to the original lender for FHA refinancing loans.
To specifically address the reader’s question about interest rate lock-ins, the answer is fairly simple. It depends on what the lender is willing to offer. Typical interest rate lock-in periods can be 30 days, 60 days, or 90 days depending on the type of loan, what the lender is willing or permitted to offer, and what you agree upon in writing. Again, these terms are negotiated between borrower and lender. They are not set by the FHA.
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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