FHA Loan Rates for January 2023

FHA Mortgage Guide Series
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Mortgage interest rates are rising right along with home prices. That means homebuyers need to pay extra attention to everything that goes into buying a home. Here’s what to know if you’re considering an FHA loan for your home purchase.

The Latest Mortgage Rate & Housing News

What’s Going On With Rising Mortgage Rates?

Mortgage rates have been on the rise since the start of the year and haven’t stopped yet. A big reason behind the increase is that inflation has remained at its highest level in 40 years. The Consumer Price Index was up 8.2% year-over-year in September – lower than August but still well above what markets and the Federal Reserve are comfortable with.

The Fed’s approach to high inflation has been to raise its benchmark short-term interest rate, a strategy that aims to make borrowing more expensive and encourage saving, driving down demand for goods and services and reducing prices. The Fed last raised its federal funds rate in September, and is expected to do so again in November.

The economic situation has mortgage rates jumping up and down on a daily basis.

“The market just can’t really decide which way it wants to go in terms of the direction of rates,” says Melissa Cohn, regional vice president of William Raveis Mortgage in New York.

Don’t expect mortgage rates to plummet until economic conditions change, experts say.

“Until we get some sustained evidence that inflation is beginning to recede, the upward pressure on mortgage rates will remain,” Odeta Kushi, deputy chief economist at First American Financial Corporation, told us.

What Can Homebuyers Do About Rising Mortgage Rates?

The current housing environment is particularly tough for first-time homebuyers, but it might still make sense to buy. “It’s always a good time to buy a home, if that’s what is important to you. It’s just about doing your research and making good informed decisions,” Eileen Derks, head of mortgage at Laurel Road, told us

Rising mortgage rates have made affordability increasingly difficult for homebuyers, despite some drops in home prices. If you’re considering a mortgage, experts say it’s more important than ever to shop around with different lenders, as rates can vary dramatically from day to day and from lender to lender.

“Until you’re ready to lock, you need to keep your eye on more than one ball,” Cohn says.

What’s Happening With Home Prices?   

The big surge in mortgage rates has started to bring down home prices. The median existing home sold for $389,500, up 7.7% from a year earlier but down from figures of more than $400,000 seen earlier in the summer, according to the National Association of Realtors (NAR).

How quickly the housing market is turning around depends on where you are. In some cities, prices are seeing month-to-month price drops of nearly 3%, while others are still riding a wave of increases. “It’s very market-dependent at the moment,” says Robert Heck, vice president of mortgage at Morty, an online mortgage broker. 

Home sales figures are dropping significantly – down 0.4% from July to August and nearly 20% from August 2021 – in part because homeowners who have favorable mortgage rates are unwilling to sell and get a loan at a much higher rate. 

Homebuyers facing a difficult environment can find creative ways to save money on a home purchase. One is to consider an adjustable-rate mortgage, Cohn says. They tend to offer periods of several years with a fixed rate – and it should be significantly lower than a 30-year fixed rate would be – before the rate starts to adjust with the market. That should give you a few years to refinance if the market improves.

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What Are Today’s FHA Mortgage Rates?

On Saturday, January 28, 2023 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 30-year FHA mortgage rate is 5.670% with an APR of 6.570%. The average 30-year FHA mortgage refinance rate is 5.650% with an APR of 6.560%.

Current FHA Mortgage rates

ProductInterest RateAPR
30-Year Fixed Rate6.470%6.490%
30-Year FHA Rate5.650%6.560%
30-Year VA Rate5.800%6.000%
30-Year Fixed Jumbo Rate6.500%6.510%
20-Year Fixed Rate6.370%6.390%
15-Year Fixed Rate5.710%5.740%
15-Year Fixed Jumbo Rate5.770%5.790%
10-Year Fixed Rate5.680%5.710%
5/1 ARM Rate5.340%7.170%
5/1 ARM Jumbo Rate5.370%6.910%
7/1 ARM Rate5.770%7.120%
7/1 ARM Jumbo Rate6.030%6.750%
10/1 ARM Rate6.320%6.870%
ProductInterest RateAPR
30-Year Fixed Rate6.440%6.460%
30-Year FHA Rate5.670%6.570%
30-Year VA Rate5.830%5.950%
30-Year Fixed Jumbo Rate6.460%6.470%
20-Year Fixed Rate6.400%6.420%
15-Year Fixed Rate5.670%5.700%
15-Year Fixed Jumbo Rate5.750%5.770%
10-Year Fixed Rate5.660%5.690%
5/1 ARM Rate5.420%7.410%
5/1 ARM Jumbo Rate5.500%7.400%
7/1 ARM Rate5.730%7.220%
7/1 ARM Jumbo Rate6.060%6.800%
10/1 ARM Rate6.170%7.140%

Rates as of Saturday, January 28, 2023

ABOUT THESE RATES

These rate averages are based on weekday mortgage rate information provided by national lenders to Bankrate.com, which like NextAdvisor is owned by Red Ventures. These averages provide borrowers a broad view of average rates that can inform borrowers when comparing lender offers. We feature both the interest rate and the annual percentage rate (APR), which includes additional lender fees, so you can get a better idea of the overall cost of the loan. The actual interest rate you can qualify for may be different from the average rates quoted in our rate table. But these rates are useful for giving you a benchmark to use when comparing loan offers by giving you a sense of how the type of mortgage and the length of the repayment term impacts your interest rate and APR.

The Pros and Cons of an FHA Loan

FHA loans are useful for people who can’t afford a large down payment, who don’t have top credit scores, and others who have trouble qualifying for a decent interest rate with a conventional loan. But because of the additional restrictions and fees, FHA loans aren’t ideal for every homebuyer.

Pros

  • Low down payment

  • Can qualify with a lower credit score

  • Favorable rates for borrowers with low credit scores

  • Higher DTI ratio allowed, up to 43%

Cons

  • Upfront mortgage insurance premium payment

  • Cannot exceed the FHA loan limits

  • More strict appraisal standards

  • Can’t waive private mortgage insurance at 20% equity

FHA Loans: Frequently Asked Questions (FAQ)

What is an FHA loan?

An FHA loan is a mortgage that’s issued by a traditional mortgage lender but backed by the Federal Housing Administration (FHA). Because these home loans are backed by the government, they’re easier to qualify for if you have less-than-perfect credit. But FHA loans also have more limitations than conventional loans, such as stricter appraisal standards.

FHA loans can be ideal for first-time home buyers because they offer competitive mortgage rates, and have low down payment requirements of as little as 3.5%. These mortgages are available for residential property of up to four units that is intended to be your primary residence.

Who qualifies for an FHA loan?

The FHA publishes its loan requirements each year, providing information on required documentation as well as credit score and debt-to-income (DTI) ratio needed to qualify. The FHA also sets maximum loan limits, which are based on where the property is located. In 2022, these limits for single family homes range from $420,680 to $970,800. 

The credit score you need to qualify for an FHA loan varies depending on your down payment. With a minimum down payment of 3.5% of the purchase price you need a credit score above 580. If you bump up your down payment to at least 10%, the minimum credit score drops to 500.

Just keep in mind that each lender has its own additional guidelines, which are usually more stringent than the minimum requirements. So make sure to contact your bank or credit union to learn more about its requirements beforehand.

How do I compare FHA loans to other mortgage rates?

Typically, FHA loans offer rates that are more favorable than conventional mortgage rates and refinance rates — especially for borrowers with lower credit scores. But you need to look beyond the interest rate when comparing offers, and also consider the fees associated with the loans. 

An FHA loan has an upfront mortgage insurance premium of 1.75%, in addition to monthly mortgage insurance costs. With a conventional loan, you can waive the mortgage insurance requirement with a down payment of at least 20%. 

What is the difference between an FHA loan vs. 30-year fixed loan?

If you can qualify for a conventional 30-year fixed-rate mortgage and a 30-year FHA loan, which one should you choose? There’s no universal answer to which is better, so everything from your personal circumstances to the current real estate market should be taken into consideration.

Right now it’s a seller’s market. Housing inventory is low, which has created bidding wars among buyers. In these scenarios, sellers typically prefer offers from buyers that will be financing their purchase with a conventional mortgage. This is because the perception is that government-backed loans have more hoops to jump through and will take longer to close or have a higher likelihood of hitting a snag that ruins the deal. So right now, a conventional loan will give you a better chance of getting your offer accepted in many parts of the country.

But FHA loans can have lower down payment requirements. The difference between a down payment of 3.5% versus 10% or 20% can be tens of thousands of dollars. Being able to move into a new home with a healthy emergency fund may be a better overall life choice then potentially paying less in mortgage insurance with a conventional loan.

What are the FHA loan requirements?

FHA loans can be easier to qualify for if you have a lower credit score or smaller down payment, but the FHA loan requirements are less flexible than some other types of home loans.

The minimum FHA credit requirement varies depending on the size of your down payment, and is:

  •  580 or higher with a 3.5% down payment
  • 500 to 579 with a 10% down payment

It’s important to note that these numbers are the government’s minimum standards, but lenders will add what are known as “overlays.” An overlay is a guideline that goes beyond what the government requires. So in reality, most lenders require a credit score of 620 to qualify for an FHA loan.

There are also FHA loan limits on the size of an FHA loan that vary depending on the housing market of an area. For 2022 the limits for single family homes are:

  • Standard: $420,680
  • High-cost area: up to $970,800

How do I find a personalized FHA loan rate?

Mortgage rates for FHA loans vary by lender, so you’ll have to shop around to find personal rates. When you’re trying to find the best FHA lender, remember that not every lender will offer FHA loans. So you can narrow your search by limiting your options to those that offer FHA loans.

Once you’ve found a few lenders you want to work with, you can call to ask what rate you may be eligible for, but the lender won’t be able to guarantee a rate until you fill out an application. Most lenders don’t charge application fees. But lenders will want to verify your income, assets, debts, and your credit score, all of which impact what rate you can qualify for.

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