FHA Loan Interest Rate Seems High

12 Replies

Im in the process of securing a 30 fixed rate FHA loan on a duplex. Credit score on my personal Experian site shows as 818. The lender says it is 771. Not sure why there is a discrepancy. Today I received the loan docs and my issue is that the rate was locked for me at 4.875% which seems high. We are putting about 6% down on a 470k loan since it was over the maximum allowable for FHA on a duplex.

I questioned the lender, who is a close friend of my business partners, and he said he cut his commission to get us down to 4.875% and it should have been 5%. Am I mistaken in feeling it is high based on todays rates? 

@Aaron K. thanks. Im trying to avoid a variety of hard pulls on my credit. What I saw from big lenders online was noticeably lower but I don't know how that impacts FHA lending.

@Ian Whiteman I believe that for mortgages you have a 30 day window where you can have various inquiries that will only count as one on your credit, because the credit bureaus know you need to shop around.  I haven't looked into it that closely, but I advise you to look into it a bit more.

Either your friend is hiking your rate to cover his compensation, or he put you on a lender paid mortgage insurance program to limit your monthly payment, but at the expense of up front closing costs. To cover the closing costs, he is giving you a higher rate.

My guess is the latter, since I would not want to assume your friend is just trying to make a quick buck off of you.

I can also give you a quick quote if you’d like if you shoot me a pm.

Regarding credit scores. There are literally dozens of different credit score algorithims for FICO scores. Your scores for a mortgage company will be different from an auto loan company which will be different from a credit card company etc.

Consumers who are not familiar with the different algorithms are always surprised that their mortgage fico scores are lower than the scores they get from other sources.  Myfico.com will show you about a dozen or so of the different algorithms.

Originally posted by @Ian Whiteman :

Im in the process of securing a 30 fixed rate FHA loan on a duplex. Credit score on my personal Experian site shows as 818. The lender says it is 771. Not sure why there is a discrepancy. Today I received the loan docs and my issue is that the rate was locked for me at 4.875% which seems high. We are putting about 6% down on a 470k loan since it was over the maximum allowable for FHA on a duplex.

I questioned the lender, who is a close friend of my business partners, and he said he cut his commission to get us down to 4.875% and it should have been 5%. Am I mistaken in feeling it is high based on todays rates? 

I would tend to agree with @Christian Bachelder. Your friend probably isn't trying to hit you for 5 points. More than likely he's doing single payer MI on a Freddie Mac Home Possible because of the lending limit in Brevard County for FHA and bumped the rate to cover the cost.