Did you know recent surveys indicate that the average American does not have enough savings to cover a $400 emergency?
Given the modest savings of most Americans, it can be difficult to come up with the 10-20% down payment required for a conventional home mortgage loan. By contrast, with an FHA loan, borrowers can take on a home loan with just 3.5% down payment, plus enjoy other benefits.
Of course, a down payment is not the only important consideration when taking on a loan. Are FHA loan rates competitive with loan rates for other types of loans? Keep reading to learn more.
What is an FHA Loan?
Before we look at FHA loan rates in more details, let’s first establish what an FHA loan is.
FHA stands for Federal Housing Authority, which means that an FHA loan is one that is backed by the federal government. These loans allow borrowers with lower credit scores or less money saved for a down payment to afford a home loan. For instance, a borrower can qualify for an FHA mortgage with a credit score of 580, while a conventional loan usually requires at least 620.
The government guarantees these loans, meaning that there is less risk for the bank if the homeowner is not able to repay.
What Kind of Rates Can I Qualify For?
Oftentimes, loans that are designed for people with lower credit scores come with higher interest rates. For instance, people with good credit scores can get car loans with as little as 0% interest, whereas those with lower credit scores may see interest rates as high as 7%.
The good news is that FHA loan rates are not generally higher than those available for conventional loans. In fact, the Federal Housing Authority has no role in dictating rates for FHA loans, so all rates are set by the market. While this means FHA buyers are not at a disadvantage for getting a good rate, it also means you will probably have to shop around.
That said, there is one way that FHA loans can actually help you qualify for a lower interest rate. FHA loans allow buyers easier access to the real estate market by providing lower barriers to entry. Rather than having to wait until you have more money saved, you can take advantage of good interest rates now.
How Do I Get the Best Interest Rate?
So the question remains: how do you find a good interest rate when using an FHA loan?
One of the most important factors is, of course, your credit score. While you can get an FHA loan with a relatively low credit score, you will likely qualify for a lower rate with a higher score.
Additionally, shopping around to different mortgage lenders can also be helpful. Compare offers from 2-3 lenders before deciding.
Explore FHA Loan Rates Today
Ready to take advantage of some of these competitive FHA loan rates? Contact us today to get started.
We at Mortgage News Channel are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible and hands-on throughout the entire mortgage process.