The best FHA lenders offer a combination of excellent service, low rates, and flexible terms. Guaranteed Rate does just that. Their completely online application process and streamlined document transfer and closing technology make the mortgage process a breeze.
While this company is known for making the mortgage process completely digital, they also have hundreds of branch locations around the country for homebuyers who prefer that in-person touch. When it comes to getting the best deal, Guaranteed Rate offers competitive rates and low lender fees. You also have a variety of term and down payment options to choose from with their FHA loans.
Compare the Best FHA Lenders
|Company||Minimum Credit Score||Starting Interest Rate||Terms||Minimum Downpayment||Online Application|
|620||2.625%||15 or 30 years||3.5%||Yes|
Best for Bad Credit
|500||Not specified||15 or 30 years||3.5%||No|
|Rocket Mortgage by Quicken Loans
Best for Real Estate Investors
|Caliber Home Loans
Best for New Home-Buyers
|620||Not Specified||Not specified||3.5%||Yes|
Best for Customer Service
|Not specified||2.50%||30 years||3.5%||No|
How to Choose the Best FHA Lender
Choosing the best FHA lenders is a personal process, and there are a number of factors that should be considered before you decide on where to get your FHA loan. Here’s what to look for:
- Qualification requirements: The first step in narrowing down the best FHA lenders is to make sure you meet their credit and income requirements. Although they might not publish it, all lenders will have a minimum credit score requirement and debt-to-income ratio requirements.
- Rates and fees: Shopping around for the best rates and lowest fees is how you save money on FHA loans. In addition to looking at interest rates, pay attention to lender fees like application fees, closing fees, origination fees, underwriting fees, and appraisal fees.
- Application process: Do you want to do everything online without having to speak to someone, or do you prefer working with a representative in person? Your answer will guide who you end up choosing for your FHA loan.
- Loan terms and amounts: You should know whether you want a 15-Year or 30-Year mortgage and roughly how big of a loan you need. That way, you can rule out any FHA lenders that don’t offer what you’re seeking.
FHA Loans vs. USDA Loans
Both FHA loans and USDA loans are backed by government agencies and allow borrowers, including those with lower credit scores than lenders typically require, to buy a home with a lower down payment and interest rate than they might normally qualify for. However, they’re not the same—namely, USDA loans were created to stimulate housing markets in rural areas, so you can only use them to buy a home in qualified zones. The table below illustrates some key differences.
|Loan Type||FHA Loan||USDA Loan|
|Minimum Credit Score||580 (500 if making a 10% down payment)||640 in most cases|
|Debt-to-Income Ratio||Less than 43% (50% if you have good credit)||41% in most cases|
|Income Requirements||None||Cannot exceed 115% median income for your area|
|Minimum Down Payment||3.5%||0%|
|Loan Limits||$356,362 minimum, $822,375 maximum, varies by region||None|
|Other Requirements||Home must be primary residence for at least one year||Must buy in a qualified rural area|
Frequently Asked Questions
Are FHA Loans Hard to Get?
FHA loans are easier to get than conventional loans. They have lower credit score requirements and more flexible income requirements.
What Qualifications Do FHA Lenders Generally Require?
Most FHA lenders require you to have a credit score of at least 580 for a loan with a 3.5% down payment or 500 with a 10% down payment, although some lenders will require a score of 600 or 620. FHA lenders also look at your debt-to-income ratio or the portion of your gross income that goes toward your debt each month, and that should generally stay below 43%. You can sometimes qualify with a DTI of up to 50% if you have good credit.
What Is the Downside of Borrowing from an FHA Lender?
The main downside of FHA loans is that they require mortgage insurance. Even if you go with the best FHA lenders, this can mean a few extra thousand in closing costs and higher monthly payments. Also, you can only get FHA loans for a primary residence, so using them to purchase an investment property is tricky. You must live in the property for at least the first 12 months.
We considered over a dozen different mortgage lenders offering FHA loans before narrowing down this list to the best FHA lenders. In doing so, we reviewed customer service, rates and fees, the application process, credit requirements, and variety of loan types offered.
Once we nailed down our picks for the best FHA lenders, we honed in on their terms, requirements, and mortgage process to find lenders that specialize in everything from first-time homebuyers to investors to borrowers with bad credit. Transparency was also important, so lenders that published clear rates and terms were preferenced.