FHA Interest Rates Hold Steady

In spite of the stock market rally last week, the FHA loan rates have held right at the 5% range over the past week.

Given that the FHA loan requirements are some of the most flexible in lending, this is fairly incredible.   The FHA rates sit roughly even with Conforming loans right now.

For borrowers with 3.5% down, there is no comparison.  FHA is the only game in town.

For borrowers with 5% down, the monthly mortgage insurance factors between the two loans can very quickly tip the scales in favor of the FHA mortgage.

Here’s an example:  A 680 FICO score, for a conforming loan at 5%, carries a mortgage insurance factor of 0.94% on this sheet from PMI.  For an FHA loan at the same level, it is .5%.   The FHA up-front mortgage insurance premium is 1.75% so the break-even is roughly 4 years.  In the past, it wasn’t uncommon for the Conforming loan to outperform the FHA loan on Day 1 until the end of the loan.

My how times have changed…