Finding the correct IRS AFR rate

[Eric Burgh]

Hi All,

Looking to close on a house and the family lender is willing to give us the lowest possible loan legally allowed, and so that the transaction doesn't fall under the category of being a gift, raise flags,etc.  House is being purchased at fair market value.

I'm looking at the IRS Applicable Federal Rates Chart found here :July 18 IRS AFR

Question is for a long term loan, which number am I looking at, or under which Table - Table 1 or Table 2

Table 1 has AFR, AFR 110%, - 130%.  Not sure what the percentage means in this case.  It looks like 3.06% is a safe bet?

Table 2 has Adjusted AFR - which if this rate moves as interest rates move, I'd rather stay away and lock in a low rate while I can.

Looking to keep it safe and don't mind if it's a couple .01% high.  Thanks in advance.