Many economists and prognosticators in the business world are predicting that FHA loan interest rates, as well as conventional loan (and all mortgage interest rates) could rise in 2010. Prognosticators have been wrong so many times at predicting the direction of interest rates so you have to take what they say with a grain of salt.
Most of the people in the business world predicting a rise of rates in 2010 are basing their argument that the Federal Reserve is going to stop purchasing Mortgage Backed Securities in March 2010. The Fed has been buying billions in MBS over the last year in an effort to stimulate the U.S. economy. The general thinking is the Fed has been artificially holding down 30 year fixed interest rates to artificially low levels around 5% and below 5% the past year. If the private market has to step in and buy MBS after March 2010, many believe rates will have to rise in order to attract these investors. How high they will need to rise is anyone’s guess. Possibly to 5.5% or 6%, but no one really knows for sure. And it’s not a given they will rise at all. Depending on the direction of the economy, who knows the Fed could extend their buying program. Much depends on the direction of the economy. One thing is pretty much for sure though, if we get a lot of good news about the economy in 2010, the FHA loan interest rate on the 30 year fixed will rise. Because not only will the Fed stop it’s purchasing program, speculation will start rising that the Fed will raise interest rates to keep inflation in check. When the Fed raises the Federal Funds Rate, it generally causes 30 year fixed mortgage rates to rise.
Here are some payments on a $300,000 FHA loan with different interest rates:
4.75% rate $300,000 loan=$1,564/mo
5.25% rate $300,000 loan=$1,656/mo
5.5% rate $300,000 loan=$1,703/mo
6% rate $300,000 loan=$1,798/mo
And here are some highlights to remember about FHA loans:
- To get a FHA loan credit score does not have to be perfect
- FHA loan interest rates are at historic lows
- You can use gift funds for FHA loan down payment
- Maximum FHA loan is $729,750, so you can get a FHA loan in expensive parts of California like Los Angeles, San Jose, San Francisco and San Diego
- Debt-to-income ratios on FHA loans are allowed up to 55% where conventional loans require 41% with less than 20% down
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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