What is the interest rate for an FHA construction-permanent mortgage?

The permanent mortgage loan interest rate is negotiated between the borrower and lender.
During the construction period, the interest rate may be variable.   The lender and the Borrower must enter into an agreement that:
  • documents the range in which the interest rate may float during construction;
  • documents the point of interest rate lock-in;
  • specifies that the permanent mortgage will not exceed a specific maximum interest rate; and 
  • permits the Borrower to lock in at a lower rate, if available and they have not already locked in a rate.
The Borrower must qualify for the mortgage at the maximum rate at which the permanent mortgage may be set. 
For additional information see Handbook 4000.1 II.A.8.j.vii. available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04985