Categories of Factors Which Affect FHA Choice Loan Rates
There are many mortgage types available currently for homebuyers. The most popular choice, however, is the FHA loan. This government-insured loan caters to homebuyers with minimal cash for down payments, credit challenges, and low incomes.
An FHA choice loan like the one offered by Primary Residential Mortgage, Inc. has one of the lowest interest rates on the market. Various factors influence the rate of your home loan directly and indirectly, though. Here are the three primary categories.
The mortgage rate you get depends on your debt-to-income ratio and credit scores. Most FHA lenders require credit scores of at least 580. FHA mortgages have a high loan-to-value ratio and allow you to borrow up to 96.5% of your home’s value. Lenders with a debt-to-income ratio of less than 43% also get attractive interest rates.
The Fed Fund Rate or Federal Reserve interest rate is the leading indirect factor which will influence your 15- or 30-year mortgage’s rates. Meanwhile, it directly affects 1-5-year FHA loans.
The Fed Fund Rate changes daily based on the buying and selling of bonds which affect inflation and economic growth. This influences investor confidence and, in turn, determines the rates of FHA loans.
FHA loans are primarily designed for owner-occupied properties including detached and manufactured homes and condominiums. The type of property you buy and its use will influence the rate you get. Some lenders will charge higher interest rates for manufactured homes and condos and those used as rentals.
Now that you know the factors that influence your FHA loan’s interest, you can make wiser financial choices. You might have no control over some of the factors mentioned, but by asserting control over those that you can, you will still get favorable rates. This will guarantee you a low-cost home loan.