We may earn revenue from the products available on this page and participate in affiliate programs. Learn More ›
Qualifying for a mortgage is not always easy, especially for first-time home buyers who may not have had the opportunity to build up their credit and savings to satisfy traditional lending requirements. In those cases, it can make sense to explore other financing options, including government-backed mortgages. In particular, prospective home buyers who are concerned that they will not qualify for a conventional mortgage because they have poor credit or lack the funds to make a sizable down payment could find FHA loans to be a viable alternative.
FHA loans are specialized mortgages that are insured by the Federal Housing Administration. Contrary to common misconceptions, FHA loans are not provided directly through the federal government; borrowers will still need to work with a mortgage company to get an FHA loan. By insuring these loans, the FHA reduces the amount of risk taken on by mortgage lenders, which in turn means that they can offer more flexible loan terms to borrowers. That can include lower down payment and credit score requirements, which can make it easier for more people to qualify for and afford a mortgage.
These home loans are only available through FHA-approved lenders, though, so not all mortgage companies will offer them. Finding the best FHA lenders requires a thorough examination of the top mortgage companies, reviewing their benefits and potential drawbacks, and then determining which ones best fit a home buyer’s financial circumstances and lending priorities. There are many mortgage companies to choose from, and the best FHA lenders all have compelling perks to offer borrowers who are in the market for a flexible mortgage.
- BEST OVERALL: Rocket Mortgage
- RUNNER-UP: Guaranteed Rate
- BEST CLOSING COSTS: PNC Bank
- BEST FOR LOW RATES: New American Funding
- BEST LOW-CREDIT OPTIONS: Carrington Mortgage Services
- ALSO CONSIDER: Mr. Cooper
What to Consider When Choosing One of the Best FHA Lenders
Home buyers may think that because FHA loans are all insured by the government and subject to the same federal guidelines FHA mortgage lenders are fairly interchangeable. But this couldn’t be further from the truth; mortgage companies that offer FHA home loans can vary quite a bit in terms of what they bring to the table. Even among the best FHA lenders, some loan providers may be a better fit than others given a borrower’s particular circumstances. As such, it’s worth taking the time to compare all available options when choosing a mortgage lender.
Coverage Area
Mortgage companies don’t always operate in every state or location in the country, even lenders with large footprints. Borrowers may find that only certain lenders will extend home loans to their particular area, which narrows down their list of potential FHA lenders. Coverage gaps, no matter how small they may be, can impact the availability of loan products for residents in some areas of the country. It’s always important to verify the availability of FHA mortgage lending options when vetting mortgage providers, especially before digging into other considerations.
Eligibility Requirements
Based on FHA guidelines, borrowers can be approved for an FHA loan with a credit score as low as 580 and a down payment as low as 3.5 percent of the loan amount. However, that doesn’t mean that lenders need to strictly abide by those guidelines when vetting borrowers. Lenders will likely take into account an applicant’s entire financial profile and credit history to determine if they can be approved for an FHA loan and, if so, what loan terms might be extended.
In some instances, mortgage companies may require borrowers to meet more stringent eligibility standards than those outlined by the FHA. For example, they may set their own minimum credit score for an FHA loan depending on other aspects of a home buyer’s financial situation. It’s also possible for mortgage companies to have more lenient lending requirements than even those outlined by the FHA, which can make it easier for borrowers to qualify for financing. Those options, when available, may be very appealing to borrowers looking to get a home loan with bad credit.
FHA Loan Types
There are many types of home loans available to finance the purchase of a new house, and even among FHA loans, home buyers may find several different options to consider. Standard FHA loans function in a very similar fashion to the ever-popular conventional fixed-rate mortgage. FHA loans can come with fixed mortgage rates that never change throughout the life of the loan, which often runs either 15 or 30 years. A 30-year fixed-rate FHA loan is likely to be the most commonly available type of FHA-backed financing that home buyers will come across. There are other types of FHA housing loans to consider, though. Some companies may offer adjustable mortgage rates on their FHA loans, which would set a fixed interest rate for an initial loan term—5 years, for instance—and then adjust at regular intervals to account for changes in prevailing mortgage rates.
There are also more specialized types of FHA loans that may interest borrowers, depending on their financial goals or needs as a homeowner. FHA 203(k) loans, for example, provide borrowers with funds to purchase a fixer-upper and then rehab the home to make necessary repairs and home improvements. An FHA streamline refinance allows homeowners with existing FHA loans to refinance their loans terms to potentially lower their interest rate, reduce their monthly payment, or shorten the length of their loan. With this type of refinance, borrowers may not need to go through a protracted review process that involves a deep analysis of their finances. Another potential option is an FHA cash-out refinance, which involves the borrower taking out a new FHA loan for a higher loan amount, paying off the remaining principal on the original mortgage, and then receiving a payout for the difference.
FHA Loan Terms
The length of an FHA home loan can have a major impact on a borrower’s mortgage rate and monthly payment. Longer loan terms tend to come with higher mortgage rates, which may increase the total cost of the loan when factoring in the interest paid over the entire life of the loan. On the other hand, a shorter loan term may offer a lower FHA rate, but borrowers could owe a significantly higher monthly payment because there are fewer total payments to make on the same loan amount. Determining what the ideal loan term looks like comes down to a borrower’s financial situation, how much money they can afford to put toward their mortgage each month, and how quickly they want to repay their loan.
In many cases, mortgage companies will offer 15-year and 30-year options on fixed-rate FHA loans, but some companies may have even more options to consider. It’s also possible that lenders will have more limited loan terms to choose from with their FHA loans, which can mean there are fewer opportunities to find the right loan length to suit a borrower’s preferences.
Mortgage Rate
The mortgage rate on a home loan directly impacts how much money a borrower will owe on their loan, including the size of their monthly mortgage payment. Interest rates on home loans are determined by a wide range of factors, including bond-trading activity on financial markets, overall economic conditions, and the borrower’s credit history. Underwriters will assess each situation to determine the mortgage rate for a particular borrower. As such, there can be a degree of variance among lenders in terms of the mortgage rates offered to prospective home buyers. It’s entirely possible for a borrower to be offered a home loan with the same loan terms but a much lower mortgage rate with one company than with another. That’s why it’s typically advisable for borrowers to rate shop with a few mortgage lenders when looking for a home loan.
FHA loan rates tend to be lower than conventional mortgage rates, which can help make them more affordable financing options for qualifying home buyers. However, it may still be a good idea to check out mortgage rates with multiple mortgage companies to get the best deal possible.
Annual Percentage Rate
When checking FHA loan rates, home buyers will likely see two rates published on lender sites: the mortgage rate and the annual percentage rate (APR). The APR will typically be higher than the interest rate on a mortgage because it accounts for more costs that the borrower will need to pay on their home loan. A mortgage’s APR factors in origination fees, closing costs, and any mortgage insurance that may be attached to the loan. This last consideration is especially important when it comes to assessing the cost of an FHA loan because this type of financing always requires a mortgage insurance premium (MIP) to be paid. Lenders use mortgage insurance as a way to protect themselves financially in case the borrower defaults on the loan. Due to the higher risk of default that comes with extending mortgages to borrowers who do not have the income or credit history to qualify for a conventional mortgage, FHA loans always require MIP. As a result, borrowers may find that the APR on an FHA loan is higher than that of a conventional mortgage even though its interest rate is lower. Because closing costs, origination fees, and other expenses that impact APR can vary from one company to another, it’s possible that annual percentage rates will be different as well, so it’s important to take a look at this calculation when comparing FHA loan costs.
Average Closing Costs
Although FHA loans are often viewed as more affordable alternatives to conventional home loans, there are still out-of-pocket costs that the borrower will owe at the closing table. As noted, MIP is required with every FHA loan, and borrowers will likely need to pay an initial premium as part of their closing costs. Other potential expenses include origination fees, title insurance, and recording fees.
All of these expenses will likely vary depending on which lender a home buyer uses. Some loan officers may even agree to waive certain origination fees or other lender fees to entice borrowers to use their mortgage company over a competitor. If prospective buyers are concerned about making a large initial payment on their FHA loan, it may be worth investigating what closing costs they will be responsible for paying at closing before their loan can be funded.
Prequalification Process
When searching for an FHA loan, first-time home buyers may think the first step to securing a home loan is to get preapproved for a mortgage. However, there’s actually a quicker process that can be completed before FHA preapproval to help buyers check what kinds of loan terms they might qualify for and what their home-buying budget should look like: prequalification. When a home buyer is comparing mortgage prequalification vs. preapproval, it’s important to remember that prequalification only provides an estimate on the amount a person could potentially borrow from a lender. This estimate is based on information provided by the home buyer, whereas a preapproval requires a thorough inspection of the borrower’s finances and credit history.
Some mortgage lenders allow customers to get prequalified online through their website, but this isn’t always the case. Home buyers may need to speak to a loan officer to report their finances and receive prequalification, which could be inconvenient for people expecting a speedy and hands-off process. No matter how lenders handle prequalification, it can be worth going through the necessary steps to see what loan amount may be available so home buyers can set proper expectations when they go house-hunting.
Application Process
Once a home buyer has found the right property for their needs and has made an offer on a house, they’ll need to prepare for the mortgage application process. Although FHA loans are specialized financing instruments backed by the federal government, the application process is roughly the same as applying for a conventional home loan—at least from the borrower’s perspective. Mortgage companies may allow customers to apply for an FHA loan online, which can be convenient for both parties. When using online application platforms, borrowers can upload bank statements, pay stubs, tax returns, and other financial documents required during the application process.
Online applications may not always be available, though, and some lenders could require borrowers to speak to a loan officer either over the phone or in person to apply for an FHA loan. More tech-savvy lenders may have dedicated mobile apps that borrowers can use to apply for a mortgage and check on the application status and any outstanding action items that need to be completed on their end. Home buyers will have their own preferences regarding the best way to proceed with a mortgage application. First-time buyers who are looking for an FHA loan may prefer the hands-on support of working directly with a loan officer, but some may want to handle as much as possible on their own through a digital platform.
Mortgage Points
Mortgage points present an opportunity for borrowers to get a lower interest rate on their home loan. When they close on their loan, home buyers can purchase mortgage points in exchange for a reduced interest rate. In essence, borrowers who buy mortgage points are trading that up-front cost for long-term savings by lowering their mortgage rate and paying less interest over the life of the loan. Although home buyers considering an FHA loan may be less likely to buy down the rate—one of the main appeals of an FHA loan is the lower down payment requirement, after all—some borrowers do wind up purchasing mortgage points on their FHA loans.
The cost of mortgage points can vary, and some lenders may not offer them at all. Home buyers who are interested in this feature may want to check that mortgage points are available and compare exchange rates across different loan providers.
Our Top Picks
When comparing the best FHA lenders, it’s important for prospective home buyers to consider what matters most to them. The top mortgage companies offering FHA loans all have different benefits to consider, from discounted rates to flexible loan terms, but the right fit will depend on each borrower’s highest priorities.
Best Overall
Rocket Mortgage
- Coverage area: 50 states and Washington, D.C.
- FHA loan types: Fixed-rate, streamline refinance, cash-out refinance, FHA 203(k)
- FHA loan terms: 15 or 30 years
- Prequalification process: Online, phone
- Application process: Online, phone, app
Pros
- 90-day rate-lock option
- 1 percent rate reduction for first year
- Rewards program points redeemable toward closing costs
- Convenient mortgage application and management via mobile app
Cons
- Somewhat misleading mortgage rate calculator
Why It Made the Cut: Rocket Mortgage may be a great option for home buyers considering an FHA loan, as the company offers an initial rate reduction, extended rate-lock option, and an exclusive rewards program. Rocket Mortgage offers a variety of perks that may appeal to home buyers looking to secure an FHA loan. For instance, the company’s “Inflation Buster” promotion can help make the initial costs of a mortgage more manageable by lowering a borrower’s mortgage rate by 1 percentage point for the first year of their home loan. This offer will effectively reduce the monthly payments on an FHA loan at the outset due to the temporarily lower interest rate. Another potential cost-saving feature is the company’s lengthy rate-lock option, which will guarantee a borrower’s mortgage rate for 90 days. This may appeal to home buyers who are still looking for the right property but are concerned about rates going up by the time they are ready to make an offer. Borrowers can also reduce their out-of-pocket closing costs on a home loan by taking advantage of Rocket Mortgage’s dedicated rewards program. Members can earn rewards points by exploring the company’s site, creating a user account, reading educational materials, and using online mortgage calculators, among other activities. They can then redeem their points to lower the closing costs on their mortgage. When trying out those mortgage calculators, customers will want to take note that listed FHA rates are based on home loans with mortgage points, which may not reflect a borrower’s own financing terms. Other digital tools, such as the company’s dedicated mobile app, are very user-friendly, allowing borrowers to manage their home loans and even apply for a new mortgage or refinance an existing one through their mobile device.
Runner-Up
Guaranteed Rate
- Coverage area: 50 states and Washington, D.C.
- FHA loan types: Fixed-rate, streamline refinance, FHA 203(k)
- FHA loan terms: 15 or 30 years
- Prequalification process: Online, phone
- Application process: Online, phone, agent
Pros
- 90-day rate-lock option
- Convenient mortgage application and management via mobile app
- User-friendly website and online mortgage tools
- Informative and insightful housing market research
Cons
- Relatively high 620 minimum credit score may be required
Why It Made the Cut: Guaranteed Rate offers a long rate-lock period and helpful digital home-buying resources, including a dedicated mobile app, mortgage calculators, and housing market research. Home buyers looking for a satisfying online experience with their FHA loan may want to consider Guaranteed Rate as their mortgage lender. Guaranteed Rate offers many online resources to help borrowers throughout the home-buying journey. The company’s proprietary real estate market research may be useful for home buyers who are early in the process and are considering where to focus their search for a new home. When borrowers are interested in learning more about their financing options, Guaranteed Rate’s various mortgage calculators can help them anticipate what they can afford, how much they might owe in closing costs, how long it will take to repay a loan with extra payments, and how much money they might save in the long run by buying mortgage points. When applying for an FHA loan with Guaranteed Rate, borrowers will want to be aware that some applicants may need a minimum credit score of 620 to qualify, depending on their credit history and current financial status. Once they are ready to lock in their rate, home buyers may be pleased to know that they can get a rate lock for up to 90 days, which is on the longer side for locking in a mortgage rate. With a rate lock, if rates go up while borrowers are still house-hunting or are in the process of closing on a house, Guaranteed Rate will honor their originally approved mortgage rate, which could help save money in the long run.
Best Closing Costs
PNC Bank
- Coverage area: 50 states and Washington, D.C.
- FHA loan types: Fixed-rate, adjustable-rate, streamline refinance
- FHA loan terms: 15 or 30 years
- Prequalification process: Phone, agent
- Application process: Online, phone, agent
Pros
- Closing cost grant of up to $5,000 available for qualifying borrowers
- Low 3 percent down payment option with no MIP
- User-friendly and details-driven home affordability calculator and real estate platform
Cons
- Mortgage rate calculator not tailored to FHA loans
Why It Made the Cut: PNC Bank customers can take advantage of an exclusive grant to help cover closing costs, and there are specialized loan options with low down payment requirements available to eligible borrowers. An FHA loan can offer an affordable alternative to conventional mortgages, but PNC provides even more ways for home buyers to potentially save money on their financing when securing a home loan. For instance, eligible borrowers may qualify for a grant of up to $5,000 that can be used to pay for their closing costs, which may help make an FHA loan even more affordable for first-time home buyers. PNC Bank also has a specialized home loan program, PNC Community Loans, which might be a viable alternative to an FHA loan that’s just as appealing to cost-conscious buyers. This exclusive loan program offers financing on home purchases with down payments as low as 3 percent of the purchase price. Unlike FHA loans, there is no MIP requirement, so eligible borrowers could potentially reduce their monthly payments by taking advantage of this financing option. When checking current mortgage rates on PNC Bank’s site, home buyers may notice that the company’s mortgage rate calculator is built around conventional loans rather than FHA loans, and that can make it more difficult to get a quick and accurate glimpse of current FHA mortgage rates. Other online resources can be very helpful, though, with a user-friendly home affordability calculator that shows borrowers real estate listings in their local market that suit their budget.
Best for Low Rates
New American Funding
- Coverage area: 48 states and Washington, D.C. (unavailable in Hawaii and New York)
- FHA loan types: Fixed-rate, adjustable-rate, streamline refinance, cash-out refinance, FHA 203(k)
- FHA loan terms: 15 or 30 years
- Prequalification process: Online, phone
- Application process: Online, phone
Pros
- Wide variety of FHA loan types available
- Relatively low mortgage rates and APR
- FHA loans not available in New York and Hawaii
Cons
- Slow online prequalification process
Specs
- Coverage area: 50 states and Washington, D.C.
- FHA loan types: Fixed-rate, adjustable-rate, streamline refinance
- FHA loan terms: 15 or 30 years
- Prequalification process: Phone, agent
- Application process: Online, phone, agent
Pros
- Closing cost grant of up to $5,000 available for qualifying borrowers
- Low 3 percent down payment option with no MIP
- User-friendly and details-driven home affordability calculator and real estate platform
Cons
- Mortgage rate calculator not tailored to FHA loans
Why It Made the Cut: New American Funding offers a range of FHA loans for borrowers to choose from, including multiple refinance options as well as low interest rates for this type of loan. Home buyers who are interested in exploring their FHA loan options beyond the standard 30-year fixed-rate mortgage may want to take a look at New American Funding. The company has several different types of FHA loans available, including FHA 203(k) loans to finance the purchase and renovation of a new home. There are a couple of refinance options to choose from as well. Borrowers who want to change the loan terms on their FHA mortgage without going through a long application process can take advantage of New American Funding’s streamline refinance option. Meanwhile, homeowners who would like to tap into their home equity can use an FHA cash-out refinance to turn some of their accumulated equity into cash. Prospective borrowers will want to take note of New American Funding’s coverage area, as the company does not provide FHA loans in New York and Hawaii. When getting prequalified for an FHA loan through the company’s website, borrowers may not receive a response right away. Regardless, having the option to get prequalified online can be convenient. Beyond the many FHA financing options that are available, one of New American Funding’s most appealing benefits is the company’s relatively low rates on FHA loans. Although mortgage rates and APR will depend on various factors, borrowers may be able to get a good deal on an FHA loan with New American Funding. a user-friendly home affordability calculator that shows borrowers real estate listings in their local market that suit their budget.
Best Low-Credit Options
Carrington Mortgage Services
- Coverage area: 48 states and Washington, D.C. (unavailable in Massachusetts and North Dakota)
- FHA loan types: Fixed-rate, streamline refinance, cash-out refinance
- FHA loan terms: 10 to 30 years
- Prequalification process: Phone, agent
- Application process: Phone, agent
Pros
- Low minimum credit score requirement of 500
- Wide range of FHA loan terms available
- Detailed amortization schedules for customer-selected loan terms
Cons
- FHA loans not available in Massachusetts and North Dakota
- No up-to-date FHA loan rates
- No online application option
Why It Made the Cut: Borrowers who are concerned about qualifying for an FHA loan may be interested in Carrington Mortgage Services’ low credit score requirements, along with the company’s various FHA loan terms. Even with the FHA’s flexible qualifying standards, some home buyers may still struggle to get approved for an FHA loan due to their credit history or financial circumstances. Carrington Mortgage Services may be able to help in those situations, as the company could approve FHA loan applicants who have credit scores as low as 500. As such, more people could qualify for FHA-backed financing with Carrington Mortgage Services. Interested home buyers may want to note that the company does not offer FHA loans in Massachusetts and North Dakota. They will also need to speak to a loan officer over the phone to prequalify and apply for an FHA loan. First-time home buyers may prefer a more hands-on application process, though, since they will be able to ask for the loan officer’s expert advice about the best way to proceed with each step along the way. Although Carrington Mortgage Services does not publish FHA loan rates online, prospective borrowers can find other useful information on the company’s website. For instance, there are detailed amortization schedules—tables that break down the date and amount of every payment owed on a loan—that allow borrowers to see what their payment schedule would be for the entire life of a loan. Such thorough information can help home buyers determine what loan terms they need to comfortably afford an FHA mortgage. There are many options to choose from in that regard, as Carrington Mortgage Services offers a wide variety of loan terms on FHA mortgages. With loan options ranging from 10 to 30 years, borrowers can select an FHA loan that best suits their financial situation, whether they want to repay the loan more quickly and owe less interest or spread out payments over a longer period of time.
Also Consider
Mr. Cooper
- Coverage area: 50 states and Washington, D.C.
- FHA loan types: Fixed-rate, streamline refinance
- FHA loan terms: 15 or 30 years
- Prequalification process: Phone
- Application process: Phone
Pros
- 1 percent rate reduction for first year
- Up to $1,500 credit for future mortgage refinancing
Cons
- Limited FHA loan types available Relatively high mortgage rates and APR No online application option
Why It Made the Cut: Mr. Cooper offers plenty of perks for home buyers, including a temporarily reduced mortgage rate on new FHA loans and a generous refinance credit that can be used to lower the cost of switching loans down the road. Mr. Cooper can be a great financing option for home buyers interested in FHA loans due to the various benefits available to home buyers. The company’s “Mortgage Markdown” offer allows borrowers to lower their interest rate on a home loan, including FHA loans, by a full percentage point for the first year of the loan term. By taking advantage of this rate reduction, home buyers can lower their monthly mortgage payments during that period of time, which can make it easier to afford an FHA loan and offset Mr. Cooper’s somewhat high mortgage rates. Borrowers must apply for an FHA loan over the phone, but that may not be much of a concern for first-time buyers or other prospective customers who would rather work directly with a loan officer as they go through each step of the application process. Although the company’s FHA loan options are fairly straightforward, borrowers can take advantage of the streamline refinance option if they want to change the terms of their FHA loan without going through a lengthy application process. In addition, new customers may receive a refinance credit of up to $1,500, which can be used to lower their closing costs if they want to refinance their FHA loan at some point. Many borrowers with FHA loans do decide to refinance into a conventional mortgage to remove the added cost of MIP once they are on stronger financial footing.
Our Verdict
Our award for Best Overall goes to Rocket Mortgage due to the long rate-lock period available to home buyers, along with the option to reduce mortgage rates at the start of a new FHA loan and an exclusive rewards program to help lower closing costs. Guaranteed Rate is our pick for Runner-Up, as the company has numerous online resources to help borrowers throughout the mortgage process and allows prospective buyers to lock in their rate for 90 days.
How We Chose the Best FHA Lenders
We weighed many different factors when determining the best FHA lenders available to home buyers today, starting with availability. The coverage area for each lender was considered, along with eligibility requirements that may veer from the standards established by the FHA. Minimum credit scores and down payment options were taken into account when we assessed each company’s FHA financing options. Loan terms, including both the length and type of FHA loans available, were an important factor in our rankings as well.
Cost considerations were also closely reviewed, ranging from mortgage rates and annual percentage rates on FHA loans to potential discounts and extra perks that may make financing more affordable for home buyers. Our research also factored in each company’s prequalification and application processes to get a better understanding of what borrowers can expect as they go through each step in the mortgage journey.
Before You Choose One of the Best FHA Lenders
FHA loans can be great financing options for first-time home buyers and anyone looking to get a mortgage while having low credit or unstable finances. That being said, an FHA loan may not be the right type of mortgage for every situation. Borrowers may face higher monthly payments compared with a conventional mortgage since every FHA loan comes with mortgage insurance. That extra insurance premium can lead to a higher APR and monthly payment even in cases when an FHA loan has a lower interest rate. Also, the only way to remove mortgage insurance on an FHA loan is to refinance into a different type of loan. When home buyers are considering available financing options and comparing conventional loans vs. FHA mortgages, it’s important to keep in mind that a conventional loan may not require mortgage insurance at all, depending on the size of the down payment.
The purpose of FHA loans is to help more people qualify for a mortgage by offering more flexible eligibility standards such as lower credit score and down payment requirements. With that in mind, the people who are most likely to benefit from this type of loan are those who are buying a house for the first time or who have a spotty credit history. Home buyers who do not face those concerns may be better served with a conventional home loan from one of the best mortgage lenders.
Cost of Opting for One of the Best FHA Lenders
Borrowers looking for an FHA loan may want to anticipate the costs that come with securing a mortgage. Although FHA loans have lower down payment requirements than conventional mortgages, borrowers will need to put some money down up front. That amount can be as low as 3.5 percent of the purchase price, but lenders may require a larger down payment depending on the borrower’s qualifications. As noted above, mortgage insurance is attached to every FHA loan, and borrowers may need to pay an initial premium when taking out this kind of mortgage. In many cases, that expense can be rolled into the loan itself and stretched across the borrower’s monthly payments.
Closing costs are a key consideration when budgeting for any kind of mortgage, and borrowers with FHA loans may need to pay origination fees, recording fees, title insurance premiums, and other expenses before their loan can be funded. The total cost of these various charges can be significant, so home buyers will want to budget accordingly when taking out a home loan.
The Advantages of Opting for One of the Best FHA Lenders
An FHA loan can be a terrific source of financing for home buyers who would otherwise struggle to qualify for a conventional mortgage. With lower credit score requirements and flexible down payment options, FHA loans make it possible for more people to qualify for a mortgage. Interest rates on FHA loans may also be lower than those of conventional home loans in some cases, which could impact the total cost of the loan for borrowers. The best FHA lenders can offer plenty of benefits that may appeal to people in the market for this type of loan, whether they are buying a home for the first time or are looking to move to a new piece of property.
- Long rate-lock periods—up to 90 days, in some cases—help borrowers avoid potential rate hikes when buying a home.
- Initial rate drops on new mortgages can make the first several months of managing an FHA loan more affordable and easy to budget around.
- Online resources such as mortgage calculators, real estate market research, and home affordability tools can educate and inform home buyers throughout the mortgage process.
FAQs
Buying a house and securing a mortgage can be very daunting, especially for people who are going through this process for the first time. FHA loans may be cause for even more confusion since they are backed by the federal government and have their own lending standards and guidelines. It can be helpful to answer some of the most common questions borrowers have regarding this type of mortgage to clear up any misconceptions and better inform home buyers so they feel confident about their selection when choosing an FHA lender.
Q. How do I apply for a FHA loan?
Borrowers will need to start by finding an FHA-approved lender. The Department of Housing and Urban Development has a handy search tool to help home buyers find an FHA lender that operates in their real estate market. Mortgage providers may allow borrowers to apply for an FHA loan online, over the phone, or in person with a local loan officer, but these options may vary from one lender to another.
Q. Who is the largest FHA lender?
According to Bankrate’s analysis of the most recent Home Mortgage Disclosure Act data, Rocket Mortgage is the largest FHA lender based on the number of loans originated.
Q. How good does my credit score have to be to get an FHA loan?
The minimum credit score for FHA loan financing can depend on the size of the down payment. Borrowers who want to put down the smallest down payment possible—3.5 percent of the purchase price—will need to have at least a 580 credit score. That being said, FHA loans can be approved with lower credit scores if home buyers are willing to make a larger down payment or can meet other eligibility requirements. On the other hand, lenders may set higher
FHA credit score requirements depending on their underwriting guidelines and the borrower’s broader financial situation. Borrowers will want to keep in mind that they will need a very high credit score to get the best mortgage rate possible.
Q. What are some common FHA red flags during the appraisal process?
Property purchased with FHA financing will need to be appraised and inspected before the loan can be approved and funded. These inspections are not terribly different from the typical home appraisals required with conventional home loans—both assess the value of the property to ensure that the loan amount does not exceed the home’s actual market value. FHA inspections will also check that the home is structurally sound and safe to inhabit. To that end, common red flags that federal appraisers may look for include outdated electrical work, water leaks, rotted wood, and dangerous substances like lead paint or asbestos.
Q Is it hard to get a house with an FHA loan?
Thanks to the more flexible eligibility requirements, FHA loans are often easier to qualify for than conventional mortgages. Because these loans are insured by the FHA, home buyers may be able to get financing with a lower down payment and credit score. However, borrowers will need to meet certain minimum standards to qualify, including making a down payment on the property.
Q. How long does the FHA take to approve a home loan?
Many lenders can approve and fund an FHA house loan within 30 to 45 days, assuming that there are no issues that come up during the application process. If underwriters find inconsistencies in the borrower’s finances, require additional documentation, or determine that the property’s appraised value is less than the loan amount, then there could be delays while those hiccups are worked out.
Q. How much money do I need as a down payment when getting an FHA loan?
Borrowers who are able to meet the FHA’s 580 credit score requirement may be able to get an FHA loan with a 3.5 percent down payment. However, FHA-approved lenders may determine that home buyers need to put more money down to qualify for an FHA loan after reviewing their entire financial situation.
Q. Why is my credit score important to FHA lenders?
Credit scores reflect the borrower’s ability to manage debt—and make no mistake, home loans are debt. A higher credit score may indicate that a person is able to keep up with their ongoing debt obligations by consistently making payments on time and in full each month. Meanwhile, a low credit score could suggest that a prospective borrower struggles to keep up with their debt and may not be in a position to take on more debt in the form of a mortgage. Lenders may perceive such borrowers as being more likely to default on their loan and may decide to deny their application or adjust the terms of the loan to offset that risk. In those scenarios, borrowers may want to consider repairing their credit and paying down some debt so they can meet a lender’s minimum credit score for FHA loans.
Q. Do FHA loans require insurance?
All FHA loans require the borrower to pay a mortgage insurance premium, which is built into their monthly payment. This insurance protects lenders in the event that borrowers default on their home loan. Home buyers may want to keep in mind that there’s no way to remove MIP from an FHA loan no matter how much equity they build up; the only option to be able to do so is to refinance into a different type of home loan. In that case, homeowners may want to check out the best mortgage refinance companies to see what their options look like.