FHA Refinance Loans and Interest Rates

FHA mortgage loan rates and refinance loan rates stayed well below the 4 percent zone in the last days of the year--now that the new year is here, borrowers may not be sure how long the best-execution FHA mortgage loan interest rates reported at the end of the year may last. Do you know whether your’re ready to commit to an FHA loan at the current rates? How do you avoid missing out on today’s rates in case they should go up in the future?

When you apply for an FHA insured loan, you should know about the FHA mortgage “rate lock-in policy” that governs these issues. Mortgage rates can and often do change from day to day, and borrowers who want to commit to a loan at the interest rate available on a specific day should know what the FHA says about interest rate lock-in commitments--something the borrower and lender can agree upon in a binding document that protects the rate for specific amount of time.

The FHA loan rules that govern mortgage loan interest rate locks can be found in HUD 4155.1 Chapter One, Section 3. That section has a heading titled, “Establishment of the Interest Rate”. It says:
 
“Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.”

You read that correctly--this section implies that FHA does not set interest rates for FHA refinance loans. The borrower and lender negotiate the rate which must be reasonable and customary for that type of loan in that housing market.

Once that rate has been agreed upon, how does the borrower get a commitment on the rate that does not change for a specified amount of time? That’s a procedure known as the interest rate lock. Of that procedure, Chapter One, Section Three has the following to say:
           
“Lenders are permitted to charge a commitment fee to guarantee, in writing, the interest rate and any discount points for a specific period of time, or to limit the extent to which the interest rate or discount points may change.”

Many want to know how long the interest rate lock on an FHA loan last--there IS an expiration date for these agreements.
           
“The minimum time for lock-ins or rate locks is 15 days. The loan may close in less than 15 days at the convenience of the borrower, and the lender may still earn the lock-in fees. Lenders must honor all such commitments.”

Talk to your loan officer if you aren’t sure how the mortgage rate lock affects you in the stage of the FHA loan application process.

 

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  • FHA Refinance Loans and Interest Rates

    FHA mortgage loan rates and refinance loan rates stayed well below the 4 percent zone in the last days of the year--now that the new year is here, borrowers may not be sure how long the best-execution FHA mortgage loan interest rates reported at the end of the year may last. Do you know whether your’re ready to commit to…