May 20, 2022
What should you know about home loan interest rates? As the home loan market begins to see higher rates than in the last few years, you’ll want to understand some of the aspects of interest rates and how they affect the cost of your mortgage long-term.
There are many home loan blogs that discuss the fluctuations of mortgage rates and talk about mortgage rates as they move higher and lower. Some lenders and bloggers discuss mortgage rates as though the ones mentioned apply to anyone who wants a home loan.
But is this true?
The rates you see advertised on the internet are usually posted as “best execution” interest rates which means that “ideal conditions” are assumed, or that the rates are applied assuming certain conditions including certain FICO score ranges.
What are the ideal conditions for some of these sample mortgage loan rates? A well-qualified borrower with high FICO scores, low debt ratios, and no missed payment issues.
That means that the actual interest rate you are offered will vary from what you see posted online and that rate may depend on your FICO scores and other financial qualifications.
But what ELSE do you need to know about FHA home loan interest rates?
The FHA does not set or regulate mortgage loan interest rates. The only requirement set by the FHA is that the rates be reasonable and comparable to other loan products like an FHA mortgage.
You have the ability to apply for an FHA mortgage with an adjustable rate. You also have the ability to refinance out of that adjustable-rate mortgage later using an FHA Streamline Refinance loan.
When you apply for an FHA mortgage, you may have the opportunity to purchase discount points that can help lower your interest rate. This can be a good idea if you plan to stay in the house long-term and don’t plan to sell the property in the foreseeable future.
If you know you’re buying a starter home and won’t live there indefinitely, discount points may not be such a good move. Talk to a loan officer about the advantages of discount points and the best circumstances to purchase them in.
The interest rates you see online are not “locked” and are subject to change. When you get serious about buying a home, you can make an interest rate lock agreement that will fix an interest rate for you for a specific period of time. You will need to close the loan within that timeframe to avoid being subject to rate fluctuations in the meantime.
A mortgage loan interest rate lock is something the lender can charge for-be sure to ask about the fees associated with this practice so you can budget accordingly.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner’s Insurance
Step 9: What to Expect at Closing
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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