Wells Fargo, the largest residential mortgage lender in the United States by volume, advertised 30-year FHA mortgage rates of 3.25% earlier today. That was 0.25% lower than their advertised rate for a 30-year conventional mortgage. Those were the current advertised rates for Wells Fargo, as of April 8, 2013, 10 a.m. (PST).
Wells Fargo Mortgage Rates Mirror National Trends
Wells Fargo’s mortgage rates have been fairly steady for the last three weeks, mirroring national trends. Nationally, the benchmark 30-year rate has been hovering just above 3.5% for the last 20 days or so. The average rate for a 30-year FHA loan, in particular, has been tracking slightly below that, according to our own survey of 25 U.S. lenders.
FHA loans are commonly offered at lower rates than conventional mortgages, because there is less risk for the lender. If the borrower defaults on the loan down the road, the lender will be reimbursed for losses by the Federal Housing Administration’s insurance fund. This is how the FHA program works, and it’s why Wells Fargo and other lenders frequently offer lower mortgage rates for government-insured loans, as compared to conventional financing.
Bear in mind the rates assigned to individual loans vary widely, based on the borrower’s qualifications. Lenders use risk-based pricing models when deciding what to charge.
For instance, a borrower with a credit score of 810, a down payment of 20%, and a debt-to-income ratio of only 10% would likely qualify for a better-than-average rate on a 30-year FHA loan. This is the ‘textbook’ definition of a low-risk borrower, from the lender’s perspective.
In contrast, a borrower with a lower credit score, a smaller down payment, and higher debt levels would likely be charged a higher mortgage rate. This borrower brings more risk to the table.
Bottom line: Wells Fargo, like all mortgage lenders, assigns interest rates based partly on the borrower’s qualifications. It says so right on their website: “Your loan’s interest rate will depend upon the specific characteristics of your loan transaction and your credit profile…”
In Other FHA News
All FHA borrowers have to pay mortgage insurance on their government-backed loans. Nothing new there. But there have been some new developments in this area recently.
On April 1 of this year, the annual mortgage insurance premium (MIP) for ‘normal-sized’ FHA loans rose by 10 basis points, or by 0.10 percent. The annual premium for loans larger than $625,500 rose by 5 basis points.
The Department of Housing and Urban Development (HUD) also announced a new rule regarding credit scores and debt ratios. It could put FHA loans out of reach for some borrowers. You can learn more about these and other new developments in our FHA roundup article.
This story includes Wells Fargo mortgage rates in the 30-year FHA category, as of April 8, 2013. Interest rates change constantly. As a result, this information may be outdated by the time you read it. To view the most current rates advertised by Wells Fargo, please visit the company’s website directly.
The assignment of mortgage rates is partly influenced by the individual qualifications of the borrower (credit scores, debt levels, etc.), as well as the number of points paid at closing.
We make no claims or assertions about the rate you will receive from a lender. The only way to find out where you stand is to apply for a loan through an FHA-approved lender. You can find a list of these companies on the official HUD website.