It’s been an interesting week for the FHA loan rates.

We’ve had every piece of bad news that mortgages could hear:

1. The economy is rebounding.  We’re seeing expansion in nearly every key metric.
2. Housing is on a roll.  This also has negative signals for the FHA interest rates.
3. Inflation is starting to creep up.  Inflation equals higher rates.

Still, after all of this bad news and after losing 11 of the last 15 trading sessions, the FHA mortgage rate is still at 5%.  That’s surprisingly great news.

We’re still looking at an odd scenario where the rate is 5% for FHA vs Conventional rates at 5% as well.  That conventional rate requires a 740 FICO for the best rate.  For a buyer with a 700 FICO score, it is actually cheaper to get the FHA loan.  That’s significantly different than just a few years ago.

It’s been an incredible month for the Government loan programs.

Today, we’re looking at the 4.75% 30 Year Fixed Rate.

On October 16th, the discount points required to buy the loan down to 4.75% was 1.82%.

As of today, it’s…..0.000%.

This is a staggering 182 basis point run in just 45 days.  On an average loan of $250,000, this is a whopping $4,550 in reduced closing costs to end up with the same low FHA loan rate of 4.75%.

We’re currently at the best rates of all time.  Even one year ago when conforming rates dropped, the FHA vs Conventional comparisons were not this even.  We’re now only seeing a spread of .125% between the two rates and the comparisons increasingly favor FHA when either of two conditions is true:

• Credit score is below 720
• Down Payment is less than 10%

Under either scenario, you’re looking at sub-5% rates but long-term savings typically lean towards the FHA programs.