The Federal Housing Administration (FHA) does not make home loans rather; they guarantee loans that are made by FHA approved lenders that meet the guidelines established by the FHA.  Since the FHA does not actually originate or make home loans, they also do not establish the mortgage rates on these loans.  Mortgage rates on FHA loans are determined by the individual lenders that are offering the loan to a borrower.  The FHA serves mainly as an insuring agency for mortgage loans that are made by private lenders.  FHA does not regulate or set the interest rate, points or margin on these loans. 

The FHA does have rules in place that can limit certain fees on loans but the rules have no bearing on the interest rate individual lenders set on the FHA loans they may originate.  Under FHA mortgage insurance programs, the interest rate and any discount points are negotiated between the borrower and the mortgage lender. 

FHA loans are available from several types of lenders including banks, credit unions and mortgage companies.  Different lenders may quote different mortgage interest rates and loan costs.  In order to obtain the best mortgage rate and terms for a new FHA loan, new borrowers should contact several lenders to make sure they are getting the best rate and loan terms.  The FHA encourages borrowers to shop around for a mortgage lender and carefully compare the mortgage rates, terms and conditions that may apply to the loan requested.

In order for prospective borrowers to compare mortgage rates and cost accurately and effectively, the borrowers needs to share with each lender the details of their situation and loan request.  FHA loan rates may vary from lender to lender for a variety of reasons and some of the reasons for the rate and cost disparities will be loan dependent such as the loan amount requested, the loan term, the borrowers credit score as well as other loan approval factors.

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