At a time when mortgage rates in general breathtakingly low levels, one of America’s largest mortgage lenders has announced that the rate on one type of mortgage is popular with first-time home buyers.
United Wholesale Mortgage — the nation’s No. 2 mortgage lender behind only Quicken Loans — now offers FHA loans at rates less than 2%.
Rates as low as 1.999%
FHA loans are insured by the Federal Housing Administration and have lower barriers to entry than the typical mortgage.
Although you may be a creditworthiness of 620 for a conventional home loan, you can qualify for an FHA loan with a score of only 500. And you may be able to make a down payment as low as 3.5%.
UWM says the FHA loans through the Conquest loan program are available for both home purchases and refinance, and those rates start at 1.999%. Refi borrowers are only eligible if they have not taken out a United Wholesale Mortgage loan in the past 18 months.
The company’s super-low FHA rate follows a string of similar rollouts this year from the credit giant. In July, UWM offered 15-year fixed-rate mortgages at just 1.875%, and currently UWM advertises conventional 30-year mortgages at 1.999%.
How can UWM offer rates that are so deep in the basement? One reason is that it’s a mortgage wholesaler: It does not offer loans directly to the public, but through mortgage brokers.
This allows the company to save on advertising and other overhead.
Is this mortgage for you? Think of the costs
The fine print on UWM’s super-cheap FHA loans says they come with “estimated financing costs of $5,700” — which likely include “points.”
Mortgages with extraordinarily low rates often require a borrower to cost known as discount points as part of the closing costs. A point usually costs 1% of the loan amount and reduces the mortgage rate by a quarter of a percentage point, say from 2.75% to 2.50%.
UWM also says that the borrowers of FHA loans must pay mortgage insurance premiums, or MIPs. There is a one-time upfront MIP at closing, equal to 1.75% of the loan amount, followed by annual MIPs of 0.85%, paid in monthly installments.
All FHA loans have mortgage insurance premium requirements to help cover agency costs. Because by backing these loans, the FHA promises to pay a lender if a borrower defaults.
The premiums never go away if you put down less than 10% to buy your home. If you make a down payment of 10% or more, you can shake off the annual MIPs after 11 years.
How do you score a great mortgage rate?
Here’s one more thing you should know about the UWM’s FHA loans: While rates start at 1.999%, they can go up to 2.5%.
The lowest mortgage rates usually go to borrowers with better credit scores who can make larger down payments, say 10% for an FHA loan.
If you want to give your credit score a boost, you can get a debt consolidation loan to pay off some of your credit card debt.
In general, the most reliable way to get the best possible mortgage interest rate is to shop around. go online, collect rate quotes from at least five lenders and compare them.
Studies by Freddie Mac and LendingTree have shown that comparative shopping works — and can save a borrower thousands, maybe even tens of thousands of dollars over time.
That strategy also works well when purchasing or renewing your homeowners insurance policy. Request quotes from multiple insurers, so you can be sure you’re getting the right coverage at the lowest possible price.