First Time Home Buyer Program Rates
FHA loans were very uncommon just a few years ago. They have now exceeded 30% of the loans originated and are an even higher percentage of the loans for first time home buyers. What this has done is create a more direct link between the FHA rate of interest and the amount of home that a first time homebuyer can afford.
See common loans for first time home buyers comparisons on the site.
The FHA loan rate has settled into the 5% range for the better part of a few weeks. That’s more than 10% extra purchasing power relative to a higher mortgage rate. That cannot be overstated. To get a 30 Year Fixed loan and have increased affordability either means a nicer home or more money left for savings and retirement.
We are seeing FHA changes coming, however. The up-front mortgage insurance premium is going up in April. That will immediately add .5% to the cost of getting a loan. We are also going to see slightly tighter standards on home loan approvals.
Nearly all first time home buyer loans are fixed rates these days and many states have down payment assistance programs that help get you into a home at today’s lower home values, low rates, and avoid the future increases to FHA closing costs.
Some state by state examples:
South Dakota: The state of South Dakota provides one program that is very close to a grant: The American Dream Down payment Initiative. First time home buyers can get a zero-interest loan for use toward the down payment and closing costs. What you would have paid in interest in effect becomes a grant. Go to South Dakota First Time Home Buyer Grant to find out more.
See all the state down payment assistance or first time home buyer programs.
