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FHA Mortgage Rates Flip Against Conventional Rates

By Dan Green

Mortgage lenders roll out a new wave of home affordability loans; Today’s live mortgage rates and the 5-day trend; FHA mortgage rates move past conventional ones.

Affordable Homes Are Everywhere

FHA Mortgage Rates Lose Interest Rate Advantage - Growella
FHA Mortgage Rates Lose Interest Rate Advantage

When you’re buying a home, where you buy affects your home affordability. Your access to mortgage loans does, too.

According to the National Association of Home Builders, the most affordable metro areas for home buyers remains in the Midwest.

Homes on the West Coast are least affordable.

The data comes from the trade group’s Housing Opportunity Index, a quarterly report tracking home values, median income levels, and mortgage rates in various metropolitan areas nationwide; and, turning them into a rankable list.

Affordable areas are ones in which local incomes are relatively large when compared to local home valuations, and the list includes cities such as Springfield, Ohio; Elmira, New York; and Cumberland, Maryland near the West Virginia border.

The least affordable places to live are in California.

Of the 236 tracked metropolitan areas in the study, the bottom 19 are each in California, including San Francisco, Los Angeles, and San Jose.

But, just because an area is “less affordable”, that doesn’t mean it’s “unaffordable”. How much home you can afford can’t be summed up by a survey.

An affordable home is a home on which you can make payments each month and still have money left over for saving, investing, and spending. And, there are mortgage programs designed to help keep homes affordable — regardless of where you live.

Two examples of home affordability products are Fannie Mae’s HomeReady and Freddie Mac’s Home Possible home loans. Both loans offer reduced mortgage rates, cheaper mortgage insurance, and minimum down payments to borrowers.

The programs also allow for pooled household income, which helps with boarders.

Other affordability products exist, too, including live-where-you-work loans aimed at teachers, firefighters, paramedics, and members of a police force. Loans like these are often brand-named, so ask your lender about your options.

House-hacking can be an affordability play, too. Buy a multi-unit home and rent the adjacent units to cover your costs for housing.

“Affordable” vs. “not affordable” can be the wrong way to approach homeownership. It’s better to get with a lender who can talk you through your choices. Buying a home may be closer than you think.

Click to see today’s mortgage rates now.

Today’s Mortgage Rates & Interest Rate Trends

Current Mortgage Rates for August 03, 2018 - Growella
Current Mortgage Rates for August 03, 2018

Current mortgage rates are dropping.

Earlier today, the Bureau of Labor Statistics released its Non-Farm Payrolls report for June and the results were slightly worse than expectations. Mortgage markets are responding in-kind.

Pricing for fixed-rate and adjustable-rate mortgage is better as compared earlier in the week, and rates are lower for all loan types.

Mortgage rates change daily and the rate quote you receive today won’t be the same as the rate quote you received yesterday, and the rate quote you receive next week.

Because mortgage rates change quickly, don’t settle for a ballpark rate quote when you can get a real one.

Talk to an actual mortgage lender for an exact mortgage quote. Then, comparison shop your choices to find your preferred combination of rates, fees, and service.

Get Today’s Mortgage Rates

Click For Rates!

FHA Mortgage Rates Flip Against Conventional

California cities on the Least Affordable Areas list - Growella
California cities on the Least Affordable Areas list

FHA mortgage rates are higher than conventional rates, currently.

New data from Ellie Mae shows that homeowners financed with an FHA-backed mortgage now pay higher interest rates as compared to homeowners using a conventional one.

Conventional loans are loans backed by Fannie Mae or Freddie Mac.

The data comes from the mortgage software group’s Origination Insight Report which shows that FHA loans closed in June at a higher average interest rate than conventional loans for the fourth straight month.

Historically, FHA mortgage rates beat conventional rates by a quarter-percentage point or more. This year, the rates have reversed.

Loans backed by Fannie Mae and Freddie Mac have been a better fit than FHA-backed loans for a lot of this year’s buyers — especially for buyers who don’t put 20 percent down.

FHA loans are no longer the de facto choice for low-down payment loans.

So which is better: FHA or conventional? The answer is “it depends”.

FHA loans are generally best for buyers with average credit scores or lower; and, buyers of a multi-unit home. By contrast, conventional loans fit buyers with higher credit scores; and, buyers looking at one-unit homes, either of the stand-alone or condo variety.

With FHA and conventional mortgage rates flipped, talk with a mortgage loan officer about your home loan options and the program that fits you best.

Making better choices means doing more good with your money.

Click to get today’s live mortgage rates.

Written by Dan Green

Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan's home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.

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