A very unusual event is taking place in the mortgage market. FHA rates, which have traditionally be higher than Fannie and Freddie rates, are substantially lower these days. I have priced out loans where the FHA rate is as much as 1/2% lower than Fannie and Freddie. Do not confuse this with the APR. The APR on FHA may be higher due to upfront MIP and the monthly MIP, however, given the spread between the 2 rates, FHA may be the better option for MANY borrowers.
I was looking at borrowers seeking a 5% downpayment with credit scores around 700. Traditionally these were good Fannie candidates. But my feeling is that the market is now pricing in a substantial risk premium into the GSE market (Fannie and Freddie) as the government is seeking ways to wind down their involvment in these entities. The government still wants to retain some position in FHA. Therefore investors who want the safest returns are buying GNMA coupons and keeping rates down.
I don’t know how long this will continue, but borrowers should make a careful analysis of the costs and benefits of choosing an FHA mortgage. FHA will be raising its monthly MIP beginning in April and this may make FHA a less attractive option. Howevever, for the short term, borrowers may be able to save thousands of $$$’s by choosing an FHA mortgage.
If you have questions regarding FHA or convetional mortgages, please contact me at dgaffin@greenparkmortgage.com.
FHA MAY BE THE BEST RATE IN THE MARKET!
A very unusual event is taking place in the mortgage market. FHA rates, which have traditionally be higher than Fannie and Freddie rates, are substantially lower these days. I have priced out loans where the FHA rate is as much as 1/2% lower than Fannie and Freddie. Do not confuse this with the APR. The APR on FHA may be higher due to upfront MIP and the monthly MIP, however, given the spread between the 2 rates, FHA may be the better option for MANY borrowers.
I was looking at borrowers seeking a 5% downpayment with credit scores around 700. Traditionally these were good Fannie candidates. But my feeling is that the market is now pricing in a substantial risk premium into the GSE market (Fannie and Freddie) as the government is seeking ways to wind down their involvment in these entities. The government still wants to retain some position in FHA. Therefore investors who want the safest returns are buying GNMA coupons and keeping rates down.
I don’t know how long this will continue, but borrowers should make a careful analysis of the costs and benefits of choosing an FHA mortgage. FHA will be raising its monthly MIP beginning in April and this may make FHA a less attractive option. Howevever, for the short term, borrowers may be able to save thousands of $$$’s by choosing an FHA mortgage.
If you have questions regarding FHA or convetional mortgages, please contact me at dgaffin@greenparkmortgage.com.