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Interest rate
Why is the rate of a FHA loan lower than conventional loan?
FHA rates are lower than conventional loans because the government guarantees the loan against default by the borrower through FHA mortgage insurance premium. FHA has upfront mortgage insurance premium and annual mortgage insurance premium and those premium goes into a fund that will be dispersed against borrower defaults. FHA loans are not credit sensitive like conventional loans. Anyone with credit scores of 640 FICO or higher will get par FHA rates whereas a 640 FICO credit score is considered a bad rate for conventional loans.


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