Compare Today's FHA Loan Rates
Current FHA Mortgage Rates
FHA loan rates change daily based on market conditions. See current FHA loan rates for each FHA loan type below.
| FHA Loan Type | Interest Rate | APR | Points |
|---|---|---|---|
| 30-Year Fixed FHA Purchase | 6.750% | 7.453% | 0.0630 ($101.82) |
| 20-Year Fixed FHA Purchase | 6.750% | 7.584% | 0.0630 ($101.82) |
| 15-Year Fixed FHA Purchase | 6.500% | 7.476% | 0.1880 ($303.84) |
Compare FHA Mortgage Rate Trends
Understanding rate trends is crucial to timing your mortgage application. Comparing rates over time can give you an idea of whether it’s the right time to lock in a rate or wait for potential decreases.
Keep in mind that even small fluctuations in interest rates can significantly impact your monthly payments and the overall cost of your loan.
Understanding FHA Loan Interest Rates
FHA loan interest rates are influenced by a variety of factors, both market-driven and borrower-specific. These rates tend to be competitive, making FHA loans an attractive option for many homebuyers.
FHA loan rates are influenced by several factors, including:
- Credit Score: While FHA loans are more forgiving of lower credit scores, a higher credit score will still help secure a better rate.
- Loan-to-Value (LTV) Ratio: A shorter loan term usually results in a lower rate. This is because you’re paying off the balance faster, which means the lender’s money is at risk for a shorter period, so they can afford to charge you less interest.
FHA rates – and mortgage rates as a whole – are also heavily influenced by market conditions. Factors like economic trends, inflation, and changes in the housing market can all play a role in shaping these rates.
Market Conditions That Affect FHA Loan Rates Over Time
- Federal Reserve Policy: The Federal Reserve doesn’t set mortgage rates directly, but its policies, especially regarding the federal funds rate, heavily influence lending rates. When the Fed raises interest rates to combat inflation, mortgage rates, including FHA rates, often rise.
- Inflation: Inflation reduces the purchasing power of money over time, which can push lenders to increase interest rates to maintain profitability. If inflation rises, mortgage rates may rise in tandem, making borrowing for a home more expensive.
- Employment and Economic Growth: Strong economic growth typically leads to higher wages and more consumer spending, but it can also lead to higher mortgage rates as demand for loans increases. Conversely, in periods of economic downturn, rates may drop as a way to stimulate borrowing.
- Housing Market Trends: High demand for homes can drive up interest rates as lenders manage the risk of rising property prices. On the other hand, during a housing market slump, FHA loan rates may decrease to encourage buyers to enter the market.
- Global Events and Market Volatility: Unpredictable global events, such as pandemics or geopolitical tensions, can cause volatility in the financial markets. Lenders may adjust rates higher in response to increased risk or lower them to encourage economic activity during uncertain times.
- Borrower-Specific Factors: As mentioned above, various buyer-specific factors – such as credit score, loan term, and credit score – also impact FHA loan rates.
How to Get the Best FHA Loan Rate
If you're looking to secure the best possible FHA loan rate, here are a few steps you can take in the right direction:
- Improve Your Credit Score: While FHA loans are designed for those with lower credit scores, improving your credit score can still lead to a lower rate. Neighbors Bank offers free credit counseling. Get in touch today!
- Make a Larger Down Payment: Putting down more money upfront can lower your interest rate, as it reduces the lender's risk. FHA loans allow down payments as low as 3.5%, so providing a down payment of 5% or so can help you secure a better rate.
- Shop Around: Different lenders offer different rates for FHA loans. Comparing multiple offers ensures you find the best deal.
- Buy Discount Points: You can pay "points" at closing (each point equals 1% of your loan amount) to buy down your rate. Generally, one point will reduce your rate by about 0.25%, so it's worth running the numbers to see if the upfront cost pays off over the life of the loan.
- Choose the Right Loan Term: If your financial plan allows, consider a 15-year loan with lower interest rates.
By following these steps, you'll increase your chances of locking in a favorable rate and saving money over the life of your loan.
Locking in Your Rate
Once you've found an FHA mortgage rate that fits your budget, the next step is to lock in your rate. A rate lock is a lender's guarantee that the interest rate you're offered will not change for a specified period, usually 30, 45, or 60 days, while your loan application is processed. Locking in your rate can protect you from fluctuations in the market, ensuring you don't end up with a higher rate if the market changes.
Benefits of Rate Locking
- Protection from Rising Rates: If rates increase while your loan is processed, your locked-in rate stays the same.
- Peace of Mind: A rate lock can help you plan your budget without worrying about unexpected changes.
- Rate Shopping: Locking in a rate with one lender doesn't mean you can't continue to shop for better offers during your lock period.
While rate locking can offer significant advantages, be aware that if rates fall after you lock, you may miss out on a lower rate unless your lender offers a "float down" option.
Whether you're looking to take advantage of today's competitive FHA mortgage rates or simply want to learn more about how FHA loans work, knowing the right steps can put you on the path to successful homeownership.