FHA Mortgage Rates
Find Out What Your FHA Interest Rate Is Today in , California.
Interest rates on home loans remain at historic lows. How long will that last? No one knows for sure, but they're sure to rise at some point.
That makes it sensible to obtain financing now while rates are low—whether you're buying a home in , California or refinancing.
You may find yourself choosing between conventional financing and an FHA loan. Here's something you should know: FHA interest rates are generally competitive with conventional loan rates.
But FHA loans also have other features that make them especially attractive. For instance, with an FHA-insured loan you can buy a home in , California with as little as 3.5 percent down.
Meanwhile interest rates change from day to day, and from lender to lender. And some lenders advertise one rate, only to change the rate when it's time to write the contract. It can be hard to make sense of it all.
How Interest Rates Are Determined
Interest rates on home loans follow the rates set by the Federal Reserve, which lends money to banks. Lenders in , California will mark up the rates they pay for the money they borrow.
With conventional loans there's another factor that comes into play. Many of these loans are later sold to mortgage giant Fannie Mae. To be accepted they must adhere to Fannie Mae guidelines. Loans that do are called conforming loans.
Fannie Mae directs lenders to increase loan costs for borrowers who present certain risks. These increased costs, called loan-level price adjustments (LLPA's) are based on several factors: the borrower's credit scores, the loan-to-value ratio, property type, etc.
LLPA's are typically added to the loan amount, increasing the effective interest rate (the annual percentage rate, or APR). This is why you may be quoted a certain rate when applying for a conventional loan in , California, but end up paying more when the LLPA's are considered.
Understanding FHA Mortgage Rates
Lenders charge higher interest rates for loans they think are risky. That's why borrowers with poor credit profiles pay higher rates.
But FHA lenders know that the government will pay them back if a borrower defaults. That allows them to be more flexible on the rates they offer.
As a result, interest rates on FHA-insured loans can sometimes be lower than those on comparable conventional loans. That includes refinances as well as purchase loans.
Here are three ways you benefit from a lower interest rate:
- Lower monthly payment
- Less paid in interest over the life of the loan
- Increase in loan amount you qualify for
Does it make sense for you to refinance? You can find out with our mortgage calculator.
Find out now how low your monthly payment will be with today's historic low interest rates!