Big US mortgage lender drops rate below 2% on low-down-payment FHA loans
Big US Mortgage Lender Slashes Interest Rate On Low Down Payment FHA Loans Below 2%
At a time when mortgage rates are generally staggeringly low, one of America's largest lenders has announced a real tipping point for a mortgage rate that is popular with first-time buyers.
United Wholesale Mortgage - the second largest mortgage company in the country that only supports Quicken Loans - is now offering FHA loans with interest rates below 2%.
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Prices as low as 1.999%
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FHA loans are insured with the federal housing administration and have lower barriers to entry than the typical mortgage.
Although you may need a credit score of 620 for a traditional home loan, you can be approved for an FHA loan with a score of just 500. And you can potentially pay just a 3.5% deposit.
According to the UWM, the FHA loans under the Conquest loan program are available for both home purchases and refinancing. The interest 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 extremely low FHA rate follows a number of similar rollouts by the credit giant this year. In July, UWM offered 15-year fixed rate mortgages at rates as low as 1.875% and is currently promoting conventional 30-year mortgages at 1.999% rates.
How can UWM offer tariffs so deep in the basement? One reason for this is that it is a mortgage wholesaler: it does not offer loans directly to the public, but through mortgage brokers.
This can save the company advertising and other overheads.
Is This Mortgage For You?
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The fine print of UWM's super cheap FHA loans states that they come with "an estimated $ 5,700 financing cost" - which likely includes "points".
Often times, mortgages with extremely low interest rates require the borrower to pay fees known as discount points as part of the closing costs. One point usually costs 1% of the loan amount and lowers the mortgage rate by a quarter of a percentage point, for example from 2.75% to 2.50%.
UWM also says its FHA borrowers must pay mortgage insurance premiums, or MIPs. Finally, there is a one-time MIP upfront equal to 1.75% of the loan amount, followed by annual MIPs of 0.85% paid in monthly installments.
Mortgage insurance premium requirements apply to all FHA loans to meet the agency's costs. Because by backing these loans, the FHA promises to pay a lender if a borrower defaults.
The premiums are never lost if you put less than 10% into buying your home. If you pay a deposit of 10% or more, you can shake off the annual MEP after 11 years.
How To Get An Amazing Mortgage Rate
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One more thing to know about the UWM FHA loans: While the interest rates start at 1.999%, they can go as high as 2.5%.
The lowest mortgage rates usually go to borrowers with better credit scores who can make larger down payments - for example 10% for an FHA loan.
If you want to give your credit score a boost, you can use 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 rate is to shop nearby. Go online, collect interest rate quotes from at least five lenders and compare them.
Studies by Freddie Mac and LendingTree have shown that comparison shopping works - and can save a borrower thousands, maybe tens of thousands of dollars over time.
This strategy also works well when you are buying or renewing your homeowner insurance. Receive quotes from multiple insurers to ensure you are getting the right coverage at the lowest possible price.
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