Mortgage rates are dropping, and VA mortgage rates are notably lower than comparable rates for a FHA loan via the Federal Housing Administration and conventional ones via Fannie Mae or Freddie Mac, a new report reveals.
While interest rates fall differently depending on loan type, for all of 2014, 30-year and 15-year mortgage rates moved lower steadily, “bestowing cheap financing opportunities upon active home buyers and existing homeowners in looking to save money via a refinance,” writes mortgage market expert Dan Green for The Mortgage Reports in a recent article.
And VA mortgage rates, which are available to eligible military borrowers as part of the VA Loan Guaranty Program, are nearly .50% below conventional rates — the lowest of mortgage rates today.
VA mortgage rates averaged 3.97% during November, according to Ellie Mae’s November Origination Insight Report.
The next-lowest mortgage rate was the average rate for an FHA loan, which averaged 4.15% nationwide, data show.
FHA mortgage rates beat conventional mortgage interest rates by about a quarter-percent.
“However, because FHA-insured homeowners are required to pay annual mortgage insurance premiums (MIP), the true cost of using an FHA loan is much higher than that,” Green says, adding that of all tracked loan types mortgage interest rates for conventional loans were the highest.
Conventional mortgage rates averaged 4.32% in November, according to Ellie Mae.
“The first reason why mortgage rates for actual, closed mortgages averaged than Freddie Mac’s published rates is that Freddie Mac’s rates are discounted to account for discount points,” Green says. “Paying discount points give borrowers access to lower rates overall, but they’re optional — not required. Not all borrowers opt to pay for discount points so their ‘closed mortgage rates’ are, ultimately, higher than what Freddie Mac reports as the ‘average rate.’”
The second reason why Ellie Mae mortgage rates are higher than Freddie Mac’s is because Freddie Mac’s rates are meant for prime mortgage borrowers only, he says.
Written by Cassandra Dowell