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What factors change FHA loan rates? Interest rates, in general, can fluctuate daily, and it can be difficult to know what to think when you see rates offered at one level from one lender, and at a higher or lower rate elsewhere. 

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

What Factors Affect FHA Loan Rates?

July 24, 2021

What Factors Affect FHA Loan Rates?
What factors change FHA loan rates? Interest rates, in general, can fluctuate daily, and it can be difficult to know what to think when you see rates offered at one level from one lender, and at a higher or lower rate elsewhere. 

Here’s what you need to know about the factors that change FHA home loan rates-and remember that the Federal Housing Administration does NOT set or influence mortgage rates.

Market Forces

Investor behavior in certain sectors such as Treasuries can have an effect on daily mortgage rates. Investors can react badly--or well--to breaking financial news that may or may not be directly related to the housing market and mortgage industry. There are no direct ratios to view when considering this issue, but it is a factor nonetheless.

When they react, their investment behavior can influence rates one way or the other. These investors do not directly touch mortgage rates, but their investment choices and influence rates.

Lender Choices

The market forces mentioned above? Each lender will make a choice based on the day’s interest rate trends (which can include influences by investors as mentioned above) and some may decide to “reprice” their mortgages with a different interest rate on the basis of that day’s rate behavior.

But not all lenders do. Some choose to pass on the savings in a lower rate or the increased costs of a higher rate to the borrower in the form of adjusted closing costs. That is one reason why it pays for a buyer to shop around for a lender. 

You want to know if your chosen lender’s rate is as good as it seems--or whether the lender has upped the price on certain closing costs as a result of rate fluctuations.

Borrower Choices

Yes, borrower choices can affect the FHA loan rate they are offered. What kinds of choices? These have to do with how you manage your credit. Your credit score is an important factor in determining the interest rate you are offered. ​You may have plenty of monthly income, but if your credit needs help, you will need to work on it.

It likely sounds at this point like we are implying that borrower activity can change FHA mortgage rates. That is NOT TRUE. What IS true is that no matter WHAT the going FHA loan interest rate might be, it may not be offered to you if your minimum credit score is too low. 

How can you think about more advanced issues like mortgage insurance premiums or other homeowner concerns if you can't qualify for an affordable loan on the primary residence you want to buy?

That is why we frequently encourage borrowers to work on their finances at least a year in advance of the home loan application. 

You can improve your credit score and get your finances in order long before the lender has a chance to offer you a mortgage rate. Mortgage payments will be cheaper on loans with lower interest rates. And you won't be offered those lower rates with lower credit scores.

Compare lenders, compare interest rates, and don’t be afraid to ask lenders plenty of questions about how they approach the interest rate issue with you and your credit qualifications. Your credit history is just important as any other factor mentioned here--work on it ahead of time for best results. 

Yes, your down payment counts, the appraisal counts, your home loan choices count, but they will count for MORE when you do the important work on your credit needed ahead of the application.

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