Understanding FHA Mortgage Rates

The Federal Housing Administration or FHA helps families to obtain home ownership through special loan programs called FHA mortgage loans. FHA mortgage rates on these loans can vary due to the different factors involved in an FHA loan. Understanding more about such loans will allow to you to decide if a FHA loan is right for you or not.

Not an Actual Loan

The FHA does not actual lend any money. Instead an FHA mortgage loan is an insurance. The FHA insures the loan or backs it up for you. An FHA loan usually requires less credit and in many cases less strict criteria than a conventional loan. An FHA loan rescues the lenders risk and thus allows for more people to qualify for mortgage loans.

An FHA loan is not just for new homeowners. One can be obtained for home repairs and used for both new and existing homes. The FHA is part of the Department of Housing and Urban Development.

FHA and Interest Rates

Typically, FHA mortgage rates are lower than what you would get with a conventional loan. This does not mean that FHA mortgage rates are the lowest rates on the market. Rather that for the individual getting the loan, these rates would be lower than the rates they would be offered on conventional loan. There are a couple different reasons for this.

The first reason is that FHA loans are insured, so they are less risky for the lender. The lender can, therefore, offer lower mortgage rates. What usually happens is the lender will base your interest rate partially on how much of a risk they perceive you to be. That risk is basically non-existent with an FHA loan.

Another reason is that FHA loans are regulated by the government. Since the FHA is part of the Federal government’s Department of Housing and Urban Development, this influence carries over into the FHA mortgage rates. These loans may more closely follow the Federal Reserve’s set interest rate than traditional loans would.

FHA loans are not a solution for everyone, though. However, if you are having problems getting an affordable interest rate and you meet all the criteria needed to apply for an FHA loan then it may work for you. It is important to always shop around. As mentioned, FHA mortgage rates are not the lowest possible rates you can get, but rather low for those who may not otherwise qualify for a traditional loan. It never hurts to check out a traditional loan first to see if you qualify and to see what kind of rate you are offered. Then you can check into an FHA loan and see how those rates stand.

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Fha Mortgage Rates

current fha mortgage rates

Understanding FHA Mortgage Rates

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