Why FHA Loans and VA Mortgage Rates Are Typically 0.5% Higher
FHA & VA Loans and Mortgage Rates Review
In referencing to the rates on FHA loans and VA loans, they are typically 1/4-1/2% higher than FNMA/FHLMC rates. This is because the GNMA funds are based on the faith and credit of the United States… they are NOT based on the yields from the 10 year note which drive conforming/conventional rates.
FHA Mortgages & VA Loan – Borrowers
FHA and VA loans take on a somewhat riskier clientele than FNMA or FHLMC and therefore the rates will be higher. What one needs to really understand is that the more risk a borrower wants a lender to possibly undertake, the higher the rate will be. It is akin to paying more for a little more. As a consumer, I would be very wary about any lender who says that he can get a rate that is significantly lower than any body else.
Think about it this way: if I am a lender and I buy my mortgage monies from the same pool as the guy down the block does, how can he afford to buy it cheaper on the same day at the same time and therefore lend it out at a significantly lower rate than everybody else.
The reverse is also true. If I am buying the same money, on the same day, at the same time, how and why would the rate I offer to you be higher than everybody else? You will recall in an earlier article I mentioned the Dodd-Frank Act of 2010, and in fact it has been mentioned many times, and that I stated that the days of a lender receiving YSP are over.
Beware Of FHA/VA Rates Which Are TOO Low
If someone is offer either ridiculously higher or ridiculously lower rates than everyone else, there is something radically wrong. Either he is some how getting a kickback from the broker he is securing the GNMA funds from (ILLEGAL!) OR he is trying to build his pipeline… at a loss to himself!
Either something illegal is happening or something stupid is happening and a word about the guy offering rates that are significantly lower than everyone else… Caveat Em tor…buyer beware. Chances are very high that his lock is only good for 15 days and no one can close a loan in only 15 days; it could take up to 10 days for an appraiser to contact you and meet with you. After that point he will give you any rate he feels like. FHA appraiser inspection includes much more than the regular appraisal report, so does an VA appraisal report.
FHA Home Loans And VA Loans Rates Conclusion
Although the regulations have been tightened across the board, there are still problems and kinks to be worked out of a very fluid situation and tenuous market. One can go online and look up GNMA prices and yields, track them and they will give you a general idea as to which way rates are moving.
See also the post about – FHA & VA Income Documentations Changes For 2011/2012