Everyone asks about rates first. No one can honestly quote you one in advance of rate lock, but the way pricing is built on an FHA insured loan is worth understanding, because several parts of it are within your control.
Where the money comes from
FHA insured multifamily loans are funded through Ginnie Mae securities. Investors buy GNMA paper because it carries a government guarantee, and the yield they require drives your coupon. This is why HUD pricing tracks the bond market rather than any individual lender's cost of funds, and why two MAP lenders quoting the same week will land close to each other.
The parts of your all-in cost
- The note rate, set at rate lock by then prevailing market conditions.
- Mortgage insurance premium, now 0.25% annually on multifamily programs and 0.65% on 232/223(f) healthcare loans. This is part of your effective constant, not a side fee.
- Servicing, built into the structure.
Comparing a HUD quote to an agency quote on coupon alone will mislead you in both directions. Compare the all in constant.
What you can influence
Timing of rate lock. The rate is not fixed until lock, so a transaction that moves quickly through HUD carries less market exposure.
Prepayment structure. Longer call protection generally buys a better coupon. A ten year step down is standard; shorter protection costs something.
Execution quality. A clean application that does not bounce back from HUD gets to lock sooner, which in a moving market is worth real money.
What you cannot influence
The underlying bond market, and HUD's review queue. Paying a higher fee does not move either one.
Why we do not publish rates
Any number published today would be wrong tomorrow, and an indicative rate that a borrower builds a model around is worse than no number at all. What we will do is talk through where pricing has been recently on comparable executions and what your structure choices would do to it.
Call us and we will give you a current read rather than a number off a web page.
Primary sources for this article
HUD revises mortgagee letters and handbooks frequently; where a provision is a draft rather than operative guidance we say so on the page. This is general information, not legal, tax or financial advice, and not a commitment to lend.
Have a property this bears on?
We will tell you which program fits and what the guidance actually requires including when the answer is that FHA is the wrong tool.