Best FHA Lenders for Mortgages
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Ever since the Federal Housing Administration was created in 1934, home loans backed by the FHA have been one of the best ways for first-time homebuyers to afford a home with a low down payment and low credit score.
FHA loans are insured by the federal government and are issued by lenders such as banks, credit unions, and nonbanks. Lenders can give borrowers who might not otherwise qualify for a home loan such good terms because the insurance protects mortgage lenders if the borrower defaults on the loan.
FHA mortgage loans have a few requirements, which we’ll get into later. The biggest ones to know about are that FHA loans require only a 3.5% down payment with a credit score of at least 580. A score lower than 580 requires 10% down. FHA mortgage lenders can choose to require a higher minimum credit score, so be sure your credit report is accurate before you begin.
Finding the best FHA lender is important because lenders compete for business, so shopping for the best deal with the lowest fees and interest rates can save you thousands of dollars. Here are nine of the best FHA lenders we’ve found for mortgages.
Related: Mortgage Insurance and FHA Loans
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Overview of the best FHA lenders for mortgages
Lender | Best for |
Bank of America | In-person assistance |
Rocket Mortgage | Mobile app |
AmeriSave | Lower credit scores |
Carrington Mortgage Services | Nontraditional credit history |
PennyMac | Online process |
Mr. Cooper | Low credit scores |
Caliber Home Loans | Veterans seeking FHA loans |
Alterra Home Loans | Immigrant families |
PrimeLending | Closing cost assistance |
Best FHA lenders for mortgages
Bank of America
Bank of America is one of two FHA lenders that requires a slightly higher credit score than other FHA lenders. It requires at least a 600 credit score, which is still lower than the 620 scores needed to qualify for a conventional loan at BoA.
Conventional loans aren’t insured or guaranteed by the federal government, so banks may require higher credit scores because they take on that risk directly.
Bank of America offers first-time buyers a few home loan programs, including FHA loans. It doesn’t list interest rates for FHA loans on its website.
If getting in-person help with a mortgage is important to you, and it may be if this is your first home purchase, then Bank of America can help as one of the largest banks in the world with many offices and many types of home loans.
Rocket Mortgage
Rocket Mortgage charges 7.25% APR for a 30-year fixed mortgage, higher than the average rate of 6.80% for such loans. You can make a 3.5% down payment, and the company takes on customers with a FICO credit score of at least 580.
One of the best things about Rocket Mortgage is its mobile app. It makes the loan application process seamless by quickly moving you to the next step and showing the loan progress, including the closing and signing paperwork electronically.
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AmeriSave
For borrowers with low credit scores, AmeriSave may be a good choice. It offers FHA loans to borrowers with at least a 600 score. Loans for more than $700,000 require at least a 640 score.
FHA loans have loan limits set by the U.S. Department of Housing and Urban Development, which oversees the FHA. According to HUD, you can borrow up to 115% of your area’s median home price. In 2023, FHA loans for a single-family home were from $472,030 to $1,089,300, depending on where you live.
FHA lenders such as AmeriSave can require higher credit scores for homes with higher purchase prices.
AmeriSave isn’t too transparent about its FHA loan rates. It doesn’t list rates on its website, except saying rates can be as low as 4.97%. To get a mortgage rate estimate, you’ll have to start its prequalification and application process, which includes allowing a soft credit inquiry.
Carrington Mortgage Services
Good credit history is usually important in being approved for a home loan, including an FHA loan. Still, Carrington Mortgage Services offers FHA loans at the lowest minimum credit score we can find: 500.
A FICO credit score of 300 to 579 is considered very poor. Another way that Carrington helps such borrowers get a home loan is by helping those with a poor or thin credit history to have nontraditional credit data to be considered. These include rent payment history, bank statements, and related paperwork for borrowers who need it, such as the self-employed.
However, when shopping for interest rates, you’ll have to start Carrington’s online application process. It doesn’t post sample rates on its website.
PennyMac
PennyMac has an online application process that is easy to use. Its online capabilities include e-signatures and online loan process tracking.
Custom rate quotes are easy to get. They’re based on home value, down payment or home equity, ZIP code, and credit score range. Potential borrowers' results will usually include rate quotes for different loan types and terms, allowing customers to compare the interest rate, APR, and discount points. This can make it easy to compare loans and see if you might qualify for something other than an FHA loan.
The company offers a 30-year fixed rate FHA loan at 7.463% APR, higher than the average 7.3%. Its minimum credit score requirement is 620 for an FHA loan.
Mr. Cooper
For borrowers with low credit scores, Mr. Cooper is known for helping people with low credit scores get approved for loans. It requires a 580 credit score on FHA loans and the standard 3.5% down payment. The 30-year loan has a fixed 7.250% APR.
FHA borrowers without a credit history can use nontraditional credit data, such as rental payments, to increase the chance of qualifying.
Mr. Cooper is a nonbank mortgage originator who doesn’t have public branches but is licensed to lend in all 50 states and does the entire mortgage process remotely. You can submit a contact form online but not a loan application.
A loan professional will contact you to discuss your loan options. Once an application is submitted, you can track it in real-time through the company’s digital loan tracker.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Caliber Home Loans
Not many lenders specialize in working with military veterans. Caliber Home Loans offers many educational resources for military members and other types of buyers. It offers FHA and VA loans, generally allowing lower credit scores, down payments, and income. The company only takes on people with a minimum credit score of 620 for FHA loans.
Caliber has a separate website focused on the Department of Veterans Affairs loans and can connect them with FHA loans.
It has an in-house educational curriculum that its loan consultants and branch managers use to help military borrowers find home loans they qualify for.
Caliber doesn’t list mortgage interest rates on its website. It also doesn’t offer general or customized rate quotes online. You must contact the lender to see what loans you qualify for, which makes comparison shopping difficult.
Alterra Home Loans
Alterra Home Loans offers FHA home loans to borrowers with FICO credit scores of at least 620.
Altera seems unique in the many ways it works with undocumented immigrant borrowers and other immigrant families to become homeowners.
Like some other lenders, it uses nontraditional income to help borrowers qualify for home loans. These include the self-employed and people who live in households where multiple family members help pay monthly bills.
For applicants who don’t have a Social Security number, Alterra offers an Individual Taxpayer Identification Number, or ITIN, a loan product that undocumented immigrant borrowers can use. These loans differ from FHA loans and require a 15% down payment, a year of tax returns using an ITIN number, and other requirements.
The company’s website doesn’t list interest rates, so shoppers must contact a loan officer for specific rates.
PrimeLending
PrimeLending offers many FHA loans, from fixed-rate mortgages at 15, 20, 25, or 30 years, to adjustable-rate FHA loans. Just don’t expect to see rates listed on its website. Applicants must contact the company for rate quotes.
Among its FHA adjustable-rate mortgages, PrimeLending offers a 5-year hybrid ARM. The rate is fixed for the first five years, then changes annually with an annual cap of 2 percentage points and a lifetime cap of 6 percentage points.
Summary of the best FHA lenders for mortgages
Lender | Minimum credit score | Minimum down payment | FHA 30-year fixed APR |
Bank of America | 600 | 3.5% | Not listed |
Rocket Mortgage | 580 | 3.5% | 7.25% |
AmeriSave | 600 | 3.5% | As low as 4.97% |
Carrington | 500 | 3.5% | Not listed |
PennyMac | 620 | 3.5% | 7.463% |
Mr. Cooper | 580 | 3.5% | 7.250% |
Caliber Home Loans | 620 | 3.5% | Not listed |
Alterra Home Loans | 620 | 3.5% | Not listed |
PrimeLending | Not listed | 3.5% | Not listed |
Note: interest rates for an FHA loan are accurate as of December 5, 2023. Some sample rates from lenders may include paying points to get lower interest rates and assume a certain loan amount. See each lender’s website for details.
FAQs
How long do I have to pay FHA mortgage insurance?
As long as you have an FHA loan. This is one of the big downsides to FHA loans and costs 1.75% of the FHA loan amount. Private mortgage insurance is required as long as you have the loan. An FHA loan comes in two forms.
The first is a one-time upfront mortgage insurance premium, or UFMIP paid at closing. The second is a monthly mortgage insurance payment.
Mortgage insurance insures your home loan in case you can’t make payments. Conventional loans are usually required until you have 20% equity in your home.
PennyMac gives the example of FHA mortgage insurance for a home bought for $200,000 in a 30-year fixed-rate mortgage. The upfront insurance fee is $3,500, or 1.75% of the loan amount. Borrowers also have to pay an annual premium as part of their monthly mortgage payment.
The UFMIP can usually be rolled into the loan costs to reduce out-of-pocket expenses.
Refinancing into a conventional mortgage someday can allow the monthly mortgage insurance required to be eliminated.
Can I refinance my FHA mortgage?
Yes. The FHA Streamline refinance loan is meant for existing FHA loans.
Homeowners can bypass traditional underwriting requirements, such as getting another appraisal or proving new income requirements.
Rates vary, but as of December 5, 2023, PennyMac offered an FHA Streamline rate at 6.125% APR on a 30-year fixed rate. That’s lower than what it offered new buyers on an FHA purchase loan.
FHA guidelines require that a streamlined refi benefit the borrower by either lowering the interest rate or converting the loan from an adjustable-rate mortgage to a fixed rate. It allows higher loan-to-value ratios than many refinance programs, so you may still be eligible even if you have little or no equity in your home.
Why should I shop for an FHA loan?
Since the federal government backs an FHA loan, it can be easy to assume that all FHA loans are the same and have the same rules.
They’re not. The FHA has minimum guidelines, but individual lenders can impose additional rules.
The required private mortgage insurance, or PMI, is 1.75% of the loan amount. Some lenders may impose additional rules and set them higher. Shopping for the best FHA loan could help you avoid such lenders.
Are FHA loans only for first-time buyers?
No. Lower credit score minimums and down payment requirements make FHA loans.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
However, current homeowners may be in better financial shape than they were when they first bought their home, and they could qualify for better loan terms and rates with a conventional loan.
Why you should use the best FHA lenders for mortgages
FHA loans have many features that make them worthwhile. Here are a few:
- You have a credit score as low as 500.
- Down payment as low as 3.5%.
- 580 credit score may be required to have a down payment as low as 3.5%.
- A mortgage insured by the Federal Housing Administration.
- Liberal FHA rules on gifts of down payment money.
Why you shouldn’t use the best FHA lenders for mortgages
An FHA loan isn’t for everyone. Here are some reasons why it may not work for you:
- Closing costs that aren’t in conventional loans may be required.
- FHA loan limits may not be enough to purchase the home you want.
- No jumbo loans.
- A 10% down payment may be needed if a credit score is between 500 and 579.
- Total monthly debt payments can’t be more than half your pretax income, making it hard for people with high debt to qualify. This is the debt-to-income ratio.
- The property must meet FHA's health and safety requirements.
- An appraisal that’s separate and different from a home inspection is required.
- Mortgage insurance is built into every FHA loan if the down payment is less than 10%.
Related: Best Mortgage Lenders for Bad Credit
The bottom line
If you don’t have good credit and don’t have much savings for a down payment on a home, then an FHA loan may be worth looking at.
Shopping for any home loan is important so you can save money. Still, it can be especially vital with an FHA loan because the qualification requirements by FHA-approved lenders may differ from the standard requirements set by the FHA.
Some lenders may charge fees that others don’t or have higher interest rates because they have looser qualification standards that cause them to take on more risk.
Instead of having to make the one-time average down payment of 20%, first-time homebuyers can use FHA loans to help make homeownership more affordable. That’s the ultimate goal of the National Housing Act of 1934, which created the Federal Housing Administration to help more people buy homes.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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