Mortgage Loans Interest Rates

FHA Mortgage Rates
FHA mortgage interest rates are definitely lower compared to any other conventional mortgage program. The Federal Housing Administration, which is a federal agency within the U.S. Department of Housing and Urban Development (HUD) assists in offering Federal housing loans with the intention of providing housing opportunities for low to moderate-income families. HUD does not offer the loans directly rather they insure these mortgage programs.

This helps to lower the risk level to lenders and as a result they willingly offer lower FHA rates compared with other conventional home loan programs. Federal Housing Administration offers two kinds of mortgage loans - single family (1-4 unit homes) and multi-family (5 or more units). It is up to the borrowers to select the most suitable home loan program with the best FHA mortgage rate.

Sometimes, you have the option to “buy down” the FHA loan interest rate. In a 2-1 buy down, you can reduce the initial FHA mortgage interest rate on your mortgage by 2% the first year, 1% the second year and 0% every year after that. To buy down a mortgage, a fee in the form of discount points is charged. Discount points lower the loan interest, as the discount points are basically treated as prepaid interest. Suppose you wish to temporarily lower the FHA loan interest rate on a 6% 20-year mortgage, the rate would be 4% the first year, 5% the next year and 6% in the subsequent years.

You also have the option to permanently buy down your FHA home loan rates. In permanent buy down mortgages, the borrower pays discount points to lower interest on the mortgage over the life of the loan. Suppose you wish to permanently buy down the loan rate from 6% to 5.5% on a 20-year mortgage, the FHA mortgage rate would be 5.5% for the next 20 years (provided you meet the required mortgage points upfront).