As the year is quickly coming to a close, many people are taking advantage of low mortgage rates, even despite mixed reports for jobless claims.
Summary: Borrowers want to be able to secure a lower interest rate on their mortgage to save money over the life of their loans. But what’s lower right now: rates for FHA loans or conventional loans?
Borrowers who use FHA loans in Washington State often enjoy lower mortgage rates than those who use conventional loans to buy a house. But over the recent past, conventional loan rates have been slightly lower than those of FHA loans.
Report: Conventional Mortgage Rates Lower Than FHA
The most recent report from the Mortgage Bankers Association (MBA), which looks at trends based on a large number of loan applications, reported loan rates for various types of mortgages. It’s a pretty good picture of what is happening across the industry.
According to the latest report, average mortgage rates for conventional home loans in Washington and across the nation were lower than those assigned to FHA home loans.
Definition: An FHA loan is one that is insured by the government, through the Federal Housing Administration. A conventional home loan is one that does not have any kind of government insurance or backing. That is the primary distinction.
According to the November 8th MBA survey:
- The average interest rate assigned to 30-year fixed-rate conventional loans with conforming balances sits at 3.29%, as of the week of July 3, 2020.
- By comparison, the average rate assigned to a 30-year fixed-rate FHA was 3.43% during the same week.
So that answers a common question among borrowers: Do Washington FHA loans offer lower mortgage rates than conventional? In many cases, they do. But in some cases, they don’t. The survey cited above has shown that the average mortgage rates for FHA loans are sometimes higher than those assigned to conventional (non-government-insured) home loans.
Of course, these are just averages. The actual rate assigned to a particular home loan can vary based on a number of factors, including the type of loan being used and the borrower’s credit score. The best way to find out what kind of mortgage rate you can get on an FHA or conventional loan in Washington is to request a quote. And we can help you with this.
Non-Government Loans Are Still More Popular in Washington
FHA home loans in Washington often offer lower rates (on average), but the “standard” conventional mortgage loan is still the most popular financing option among borrowers these days.
Related: Loan options for first-time buyers
The MBA report mentioned above also showed that “the FHA share of total applications increased to 11.7 percent from 11.4 percent the week prior.” This means that Federal Housing Administration loans are a relatively small slice of the overall mortgage market.
The most popular type of home loan in Washington State and across the country is the 30-year fixed-rate conventional home loan. These mortgage products are originated, and sometimes insured, solely within the private sector. They do not have any government insurance or guarantee.
And the fixed-rate structure means that the borrower’s mortgage rate will typically stay the same for as long as they hold the loan. The 30-year term allows borrowers to spread their payments out over a longer period of time, thus reducing the size of the monthly payments.
Additionally, some borrowers choose conventional loans because it allows them to avoid paying mortgage insurance. If you use a conventional loan with a down payment of 20% or more, you could avoid this added cost (which is typically required with smaller down payments).
Disclaimer: This article includes average FHA and conventional rates for the first week of July 2020. Data was provided by third-party sources not associated with our company. We have presented them here as an educational service to our blog readers.
Need a Home Loan in Washington?
Will you need mortgage financing to buy a home? At Sammamish Mortgage, we offer a wide variety of mortgage programs and tools with flexible qualification criteria. We serve the entire state, as well as the broader Pacific Northwest region that includes Washington, Oregon, Colorado, and Idaho. Please contact us today with any financing-related questions you have.