Securing a loan through a federal lender can be a great way to get a good mortgage rate on a home or a refinance, but there isn’t a set rate that you’ll be given. These lenders do not offer rates that are determined by the federal government. Instead, the government insures the loans they give and as a result, the lenders are more lenient with their homeowners simply because there is less risk involved. There are many factors that come into play that can and will affect whether or not you get the FHA lowest refinance rates of the current market.
Your Credit Score and Finances
Everybody knows that the rate you are given is largely determined by your financial situation. However, it’s not an uncommon belief that your finances don’t have any sway with the federal lenders. This is false. Your finances and credit score can and do affect your interest rate, it just isn’t as drastic as it would be through a traditional lender. The federally approved lender will still be willing to work with you to a point, whereas often the conventional lenders deny the loan or give such high interest rates it would never be worth it to the homeowner.
Typically federal lenders will work with homeowners with a score that is in the five hundreds. However, the lower the score the higher the interest rate. If you have a score 720 or higher you’ll be in a great place to shop with both conventional and federal lenders, comparing whether or not the FHA lowest refinance rates offered are lower than those you will get through a traditional lender.
Aside from your credit history, your work history also impacts the rate you are given. An unstable job will be a red flag, whereas a steady income with the same employer is considered a good thing. In addition to this, late payments on existing debt are big. Pay your debts on time so you don’t get red flagged throughout the refinance process.
And last, financially you do not want to have a debt-to-income ratio that is extremely high. This is looked at very seriously by the lenders and can affect the rate or sometimes stop the loan in its tracks. Maintain a healthy debt-to-income ratio. It is great for your finances.
Other Factors that Can Affect your FHA Lowest Refinance Rates
There are a lot of factors that can drive your rates up or down, affecting the FHA lowest refinance rates that are possible for you to secure. Some of these have to do with your loan terms, including the amount of the loan, the type of loan, the down payment, and the length of the loan.
The longer term loans tend to have a higher interest rate, so a thirty-year-loan will have a higher rate than a 15-year term – the longer the lender holds the loan the higher the risk so the rates adjust accordingly. Also, the loan type will impact the amount. Oftentimes homeowners secure an adjustable rate mortgage which may have a lower initial rate than a fixed loan, but after a few years the rate adjusts and the new rate may be higher. This can impact your bottom line.
Your down payment will affect your rate as well. Generally the more you can pay down, the better off you will be. Of course, it can be difficult to pay a lot of money down when you are also trying to pay the closing costs. Many homeowners choose to have the costs rolled into their mortgage amount, but bear in mind that if you get a no-cost refinance you will more than likely have a higher rate.
To reduce the rate a lot of homeowners will pay points up front on their loan. By paying points you’ll pay more up front but less in interest over time, and sometimes the rate will drop because you’ve paid the point. This is a really good strategy for homeowners who intend to live in their home long term, but it isn’t as beneficial for those who know it is a short-term investment.
There are many factors that may come into play above and beyond what has been mentioned in this article. Each lender has their own set of criteria that you will need to follow to secure the lowest rate you can. When it comes time to refinance make sure you discuss all of the details with your lender so you know exactly what you’re getting when you sign the contract.