The FHA Loan Still Beats a Conventional 30-Year on Rate
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The FHA loan still beats the conventional 30-year on rate. In FreeRateUpdate’s lender network, the best advertised FHA purchase rate was five eighths of a point below the best conventional 30-year on August 1, and on October 2 it was still three eighths of a point lower.
Both rates went up in that time. The best conventional 30-year moved from 6.125% to 6.625%, and the best FHA from 5.5% to 6.25%. On October 2 those best rates came with points, 1.932 on the conventional loan and 1.605 on the FHA loan, and they’re advertised interest rates, not APRs or quotes.
| Date | FHA | Conventional | Gap (percentage points) |
|---|---|---|---|
| July 11 | 5.25% | 5.875% | 0.625 |
| August 1 | 5.5% | 6.125% | 0.625 |
| September 1 | 5.5% | 5.99% | 0.49 |
| September 19 | 5.875% | 6.25% | 0.375 |
| October 2 | 6.25% | 6.625% | 0.375 |
What the lower rate is worth
Take two $300,000, 30-year fixed loans at the October 2 rates, one of them an FHA loan for a buyer who qualifies with the lender, both paid on schedule with no refinancing or extra payments. The FHA principal and interest payment, before the mortgage insurance and other charges that lift its APR to 7.016% against 6.837%, is about $1,847 a month against $1,921, about $74 less.
The scheduled interest the FHA loan saves, not counting points or the mortgage insurance FHA loans carry, comes to about $26,600. And in this example the FHA loan also carries fewer points.
