FHA Loan Articles
News, updates, and explanations to keep you informed.
How Does the FHA Regulate Interest Rates and Closing Costs?
If you’re looking for an FHA mortgage as a first time home buyer, you’ve got quite a lot to learn about the home loan process--chances are you’ve already taken in some new vocabulary about the business of buying and selling a home. For FHA home loans, that learning curve also includes extra things to understand about how FHA loans compared to conventional loans.
It's easy to make certain assumptions about government home loans, especially where interest rates are concerned. Did you know the FHA and HUD do not regulate, set or control interest rates on FHA home loans? Interest rates for FHA mortgages are governed by the same principles and market forces as conventional loans. The FHA loan difference is in the terms of the loan and how it is underwritten.
Interest rates must be negotiated between the borrower and the lender and the rate a loan applicant gets can depend on a variety of factors including credit score. Some FHA loan applicants assume credit scores are the determining factor in eligibility for an FHA home loan the same as conventional loans; the FHA's process differs from conventional loans and credit score is not viewed the same for an FHA mortgage. But that doesn't mean the lender won't set interest rates accordingly.
The FHA also does not set specific limits or caps on closing costs, but FHA requirements do say they must be "reasonable and customary." What does the FHA consider to be unreasonable? That may determined by the FHA on a case-by-case basis but some items may not be charged to the borrower and are already spelled out for the borrower’s protection.
The borrower must conform to all restrictions and limitations set down by FHA lender policy--many such restrictions prevent the lender from passing on typical costs of doing business to the borrower. The borrower can’t pay for items the lender would pay for regardless such as tax service fees or other items.
FHA NEWS and RELATED ARTICLES
Some FHA loan applicants come to the application process wanting nothing more than to make their down payment and get into their mortgage. But other borrowers approach their FHA mortgage with a pre-payment strategy.
Some of the most frequently asked questions about making a new home purchase using an FHA guaranteed mortgage loan involve the issue of the down payment.
Borrowers who have experienced financial trouble and wind up selling their property in a short sale arrangement often recover from their difficulties and feel ready to become homeowners once more.
Earlier this year, the FHA and HUD issued a press release about changes to the FHA mortgage insurance policy. The new policy will include alterations to current mortgage insurance premium policy and how long such policies remain in effect.
If you’re applying for a first-time FHA home loan, you’re likely wondering how long your mortgage will be and what kinds of options you might have for shorter or longer loans, early payoff or what happens if you just pay the monthly mortgage minimum.