Do banks make money on FHA loans? Is a different bank going to have a different FHA rate?

Asked by Tyler, Sheridan, WY Mon Nov 3, 2008

Our bank quoted us a 7.25% loan that was an FHA loan with 3% down. My wife has a 773 FICO score and I at a 673, we have good credit history, good paying stable jobs and our debt-to-income isnt bad at all. I have been looking at rates all weekend and seeing them in the mid six percent area. ANother website said for the state of wyoming that the highest it had found in wyoming was a 8.0% and the lowest being a 6.0% for an FHA. So why is my bank taking me to the cleaners? Is 7.25% reasonable? Am I being unreasonable?

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4
Luke Allison, , Asheville, NC
Mon Nov 3, 2008
Hi Tyler-

I am not sure when your bank quoted your rate to you but I just priced out your FHA file and I can do it for 6.5% with a 30-day lock.

If I were to sell you on an FHA loan at 7.25% then I would make 2% of the loan amount as a rebate to me - probably enough to pay all of your closing costs!
I would be glad to give you a second option for financing if you feel you are being priced too high. Yes, rates are trending upward but they have not hit the low 7's yet for that credit score.
Please call me if you have questions.
Luke Allison
Flagstar Bank
828-777-8828
Luke.Allison@flagstar.com
0 votes
Tyler, Home Buyer, Sheridan, WY
Mon Nov 3, 2008
Thats what I thought but we were under the impression that FHA was the loan not just the backing. Thank you for clairifying that for us. The bank told us the only money they were making on the loan was the 1500 for getting the loan started. Thanks for the advice
0 votes
David Chambe…, , Saint Petersburg, FL
Mon Nov 3, 2008
also they make money on all loans that is why they are in business.
0 votes
David Chambe…, , Saint Petersburg, FL
Mon Nov 3, 2008
are you dealing directly with the bank or working through a mortgage broker? The bank is working to make money for themselves and A Mortgage broker will work to get you the best rate. FHA is a loan guarantee not actually the financing. and which agency are the scores through, If they picked scores from multiple agencys they would use the lower of the two or the middle of three credit scoresfor each person. Bottom Line Shop Around
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