August 17, 2015
FHA home loans have a set of rules that govern interest rates. HUD 4155.1 explains that lenders must inform the borrower that FHA loan interest rates are negotiable–FHA does not set or regulate the rates, though it does require interest rates on FHA loans to be reasonable and “customary” compared to similar loans of its type.
Chapter One of HUD 4155.1 states: “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.”
We write regularly about FHA loan interest rate trends, and discuss something called the interest rate lock or interest rate lock-in, which is an agreement between the borrower and lender to commit to a mortgage rate for a specific period of time, to protect the borrower from changes in the rates before the loan closes.
The interest rate lock-in can come with a fee, a practice that FHA loan rules do permit, but also regulate: According to Chapter One, “Lenders are permitted 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.”
FHA loan rules have a minimum time for lock-ins–15 days. However, the rules add that the FHA loan, “may close in less than 15 days at the convenience of the borrower, and the lender may still earn the lock-in fees. Lenders must honor all such commitments.”
Furthermore, the lender would be required to re-qualify an FHA borrower if there is any alteration in either the interest rate, or discount points. The rules aren’t specific as to the exact set of circumstances under which the rate or points might change, only that the borrower must be re-qualified if they do change.
Do you have questions about FHA loans? Ask us in the comments section.
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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