Many lenders often take advantage of FHA consumers by charging excessive points or origination fees. FHA borrowers are vulnerable because of poor credit histories and many times they are often bidding for homes against borrowers with larger down payments in more financially advantageous positions. Lenders often spread disinformation about the difficulty of qualifying for an FHA loan in order to justify higher rates fees. At the New York Mortgage Company we very rarely charge points upfront or an origination fee (unless the loan is exceptionally difficult - 2% of cases). Because it goes against the spirit of what the FHA loan program is intended for, to promote home ownership by getting borrowers into homes with down payments as low as 3%. Charging unnecessary points or origination fees puts this dream further out of the reach of first time homebuyers. The risk in case a borrower defaults is not shouldered by the lender, it is shouldered by the U.S. Government. Lenders that have FHA loans that go into default/foreclosure are reimbursed by UNCLE SAM giving them much less justification to charge higher rates or fees and rip off borrowers.

Should FHA rates be much higher than conventional rates?

    The answer is NO. Lenders want you to believe FHA is a higher rate program than it is, the truth is FHA rates usually land somewhere between conventional Fannie Mae rates (the lowest rates for full documentation loans) and conventional jumbos (jumbos are anywhere from 3/8% to 1/2% higher than Fannie Mae depending on the size of down payment and other factors). They very rarely exceed the conventional jumbo rate and when they do it usually by a very small margin, usually no more than an 1/8. It is based on market conditions but anything higher and your lender is most likely overcharging you on the rate. At the New York Mortgage Company our FHA rates are very competitive when compared to other New York lenders. We treat our FHA customers with respect.

Beware of lenders who quote lowball rates.

    Few consumers are truly aware that interest rates fluctuate daily. When you call lenders on the phone and receive a rate it is just a quote. When you apply and are in the process of being approved at some point in the process you have to decide when to lock your rate in. If your application goes smoothly and you are approved under a certain set of underwriting parameters then the rate you lock in at is the rate you should receive at the closing table. Your loan officer should inform you and go over the concept of ratelocks (early in the mortgage process).  Unfortunately in today's market many lenders knowing that rates fluctuate daily will intentionally misquote rates and intentionally lowball customers in order to get their application. Many do not inform consumers about ratelocks (or may do so late in the process when it is getting near time to close) and may float rates (in order to make more money) or promise one rate and deliver another later. Some even bump up the rate at the closing table without the customer knowing beforehand. NYMC does not believe in these deceptive marketing tactics and will quote rates than can be delivered. Our loan officers will go over ratelocks in detail and not play games to get your application. Our FHA rates are some of the most competitive in the market and may other lenders may be tempted into using objectionable tactics (misquoting rates or charging other excessive fees) in order to beat them.