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FHA Mortgage – Rates to Stay Low

Currently, FHA mortgage rates are not much more than those of traditional 30-year fixed-rate loans. Right now the rate for an FHA 30-year fixed rate loan is 4.250 percent, while the APR is 5.563 percent. A conventional 30-year fixed rate loan has a rate of 4.375 percent with an APR of 4.491 percent. The latter loan is the prime rate for a borrower with good credit and a substantial down payment.

Mortgage rates, especially FHA mortgage rates, are about as low as they will go. The mortgage interest rates forecast shows that rates will stay low in the short term before gradually starting to increase as the economy improves. Rates are expected to go up starting later this year. Even a small increase in the prevailing rates will make a large difference over the life of the loan, and this is why many consumers are rushing to lock in low interest rates while they can. The number of mortgage applications climbed by 15.5 percent last week.

Federal Housing Administration, or FHA, loans are guaranteed by the federal government and are a good option for first time home buyers and others who may not be able to qualify for a conventional loan. These loans require a down payment of only 3.5 percent and are available to borrowers with lower incomes and less than perfect credit scores. The loan limits have also been raised temporarily to allow more borrowers access to FHA loans.

On the downside, FHA loans always have slightly higher interest rates than conventional loans and the buyer must also pay for private mortgage insurance (PMI), which causes the overall payment to go up slightly. The PMI can be dropped after the buyer has made five years of payments without defaulting. Any home purchased using an FHA mortgage must also be very well maintained. These loans are a great option, however, and every prospective home buyer should consider them.

Consumers who are considering a home purchase need to act fast and buy in the next couple of months before interest rates start to rise. If the mortgage interest rates forecast is correct, consumer who wait to buy may end up paying a lot more for their houses than they otherwise would. Because they are always slightly higher than the average rate, FHA mortgage rates will go up even more than conventional loans. This is yet another reason consumers should buy now.