FHA loans insured by the Federal Housing Administration can help you secure a mortgage with a low down payment, and here you can compare top lenders to make sure you get the best deal.
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AmeriSave Mortgage Corp. is an online lender that has been in business since 2002. It was one of the first to offer an offsite digital mortgage experience for customers. The company says it has financed more than 664,000 borrowers since it began operating. With headquarters in Atlanta, AmeriSave services loans in 49 states and Washington, D.C.
Pentagon Federal Credit Union, widely known as PenFed, offers borrowers access to many types of mortgages: conventional, adjustable rate, jumbo and Department of Veterans Affairs, plus refinancing loans and home equity lines of credit. The financial institution, which serves 2.8 million members, was established in 1935 and is based in McLean, Virginia.
Best for low APR
New American Funding is a mortgage lender offering a variety of home loan options to homebuyers and homeowners nationwide except for Hawaii. The company, founded in 2003 and based in Tustin, California, has originated $64.2 billion in mortgages to date.
PNC Bank is one of the largest banks in the United States, serving more than 9 million customers in all 50 states. A full-service mortgage lender, PNC offers most mortgage loan product types.
Bank of America serves roughly 67 million customers in all 50 states. The lender offers conventional, Federal Housing Administration, Department of Veterans Affairs and jumbo loans as well as home equity lines of credit and mortgage refinancing.
Guaranteed Rate, founded in 2000 and based in Chicago, offers mortgage options including conventional loans, FHA loans, jumbo loans and interest-only loans to customers in all 50 states and Washington, D.C. Borrowers can take advantage of specialized loan products and Guaranteed Rate’s online application, documentation and loan payment options.
Wells Fargo offers a variety of mortgage products nationwide. Options include conventional, government-backed and jumbo loans. You can also refinance an existing mortgage with Wells Fargo.
Best for customer service
Rocket Mortgage, the largest mortgage lender in the nation, was founded in 1985. The Detroit-based company is best known for its fully digital experience of buying or refinancing a home. Rocket Mortgage changed its name from Quicken Loans in the summer of 2021.
Chase, one of the world’s largest banks, was founded in 1799 in New York and offers fixed-rate, refinance and other mortgage loans.
Best for online application and approval
Homefinity launched in 2018 as the online lending division of Fairway Independent Mortgage. It offers a variety of mortgage products, including conventional mortgages, FHA and VA mortgages, and mortgage refinancing.
The 30-year mortgage rate continued to climb past 7% this week, reaching the highest point in four months. Mortgage rates rose further for most other long-term home loan products, including VA loans, FHA loans and jumbo loans.
Mortgage interest rates are twice as high as they were at the beginning of 2022, which continues to have a tangible impact on mortgage affordability and consumer housing sentiment. Mortgage rates are widely expected to fall throughout the course of 2023, but this recent surge comes just ahead of the busy spring homebuying season. Here are the current mortgage rates, without discount points unless otherwise noted, as of March 9:
- 30-year fixed: 7.16% (up from 7.07% a week ago).
- 20-year fixed: 6.97% (down from 7.02% a week ago).
- 15-year fixed: 6.29% (equivalent to 6.29% a week ago).
- 10-year fixed: 6.32% (down from 6.43% a week ago).
- 5/1 ARM: 5.8% (up from 5.68% a week ago).
- 7/1 ARM: 5.93% (up from 5.84% a week ago).
- 10/1 ARM: 6.18% (up from 6.09% a week ago).
- 30-year jumbo loans: 7.26% (up from 7.12% a week ago).
- 30-year FHA loans: 6.27% with 0.05 point (up from 6.2% a week ago).
- VA purchase loans: 6.48% with 0.05 point (up from 6.32% a week ago).
Is your dream home within reach? U.S. News’ mortgage calculator will show you how much house you can afford.
An FHA loan is a mortgage insured by the Federal Housing Administration, which allows your lender to offer you a better deal compared with a conventional loan. Government backing means easier credit qualifying and lower down payments because lenders are protected if you default on payments.
Buyers can obtain FHA home loans through approved lenders, such as banks. The loans have 15- or 30-year terms with fixed or adjustable interest rates.
Flexible underwriting standards are geared toward homebuyers with credit blemishes or little savings toward a down payment. You could qualify for an FHA loan if you’ve had a bankruptcy or other financial difficulties, but you will need to satisfy certain requirements regardless of your circumstances.
When considering an FHA mortgage loan, be sure to understand the different options that are available:
- Traditional mortgage. A traditional FHA mortgage loan finances a primary residence, usually for low- to moderate-income borrowers.
- Energy Efficient Mortgage. An FHA Energy Efficient Mortgage includes funds to upgrade your home’s energy efficiency, such as adding double-paned windows or a setback thermostat.
- Home equity conversion mortgage. This FHA mortgage helps seniors age 62 and over retain the title to a home but convert its equity into cash. Among other qualifications, you must use the home as your primary residence, own the home outright or have considerately paid down its existing mortgage.
- Section 245(a) mortgage. This program is best for borrowers who expect their income to increase, such as low-income and young families. Payments start modestly and gradually increase during each year of the loan.
- 203(k) improvement mortgage. This FHA mortgage is for someone purchasing a fixer-upper who needs the funds for home improvements built into the loan. The cost of the renovations must be at least $5,000 and cannot exceed 110% of the appraised value of the home.
The borrower and the property must qualify for an FHA home loan. Key requirements include:
- A minimum down payment of 3.5% for a credit score of at least 580 and 10% down if your credit score is between 500 and 579.
- A debt-to-income ratio of no more than 50%.
- Steady income and proof of employment, such as pay stubs and tax returns.
- A property that meets FHA loan limits for your area.
- A valid Social Security number and legal U.S. residency.
- No recent bankruptcies or foreclosures.
- Appraisal by an FHA-approved appraiser, and the home must meet minimum FHA property standards.
- A home that will be your primary residence, not an investment property or a second home.
- Buyers must move in within 60 days of closing.
Borrowers are limited to one FHA loan at a time, except in certain circumstances, such as relocation or divorce.
Government backing can make owning a home possible for people who might otherwise have been denied loans. Although FHA loans feature relaxed credit requirements, you still must present the best payment history you can.
Bankruptcy does not rule out an FHA home loan, but you will have to wait two years to apply. A foreclosure requires a three-year waiting period.
Also, note that borrowers cannot get an FHA loan without a down payment. But you can use gift funds to cover your down payment, and the seller can pay some of your closing costs: up to 6% of the home’s purchase price.
Find the Mortgage That’s Right for You
- Lower credit scores can qualify. You could get an FHA loan with a credit score of 500 and a down payment of at least 10%.
- Lower down payments are acceptable, such as a minimum down payment of 3.5%.
- There is no minimum or maximum income requirement.
- You may pay higher total mortgage costs because of upfront and monthly mortgage insurance. This protects the lender if you default on your loan.
- Strict FHA home appraisal guidelines may cause a seller to refuse an offer.
- You may face potentially restrictive loan limits, depending on where you live.
- An FHA loan can only be used to purchase a primary residence.
Chief among the drawbacks of an FHA loan for bad credit is mortgage insurance. To protect the lender against losses that may result if you default on your mortgage, an FHA loan requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of down payment.
The upfront mortgage insurance premium is 1.75% of the loan amount and can be paid at closing or rolled into the loan. The annual premium is typically added to your monthly mortgage payment, and can range from 0.45% to 1.05% of the loan amount per year.
If you put at least 10% down, you will pay this premium for 11 years – but if you put less than 10% down, you will pay the entire term length. Getting rid of FHA mortgage insurance requires refinancing into a non-FHA loan.
“If a borrower has good credit but limited cash on hand, other government-backed loans are available for less money down,” says Stephen Moye, sales manager and senior loan officer for Tustin, California, mortgage lender New American Funding.
You can seek preapproval for an FHA loan from an FHA-approved lender. The process will resemble the one for other types of mortgages. If you are preapproved, you will receive a letter that is valid for 60 to 90 days. The letter typically includes the purchase price, loan program, interest rate, loan amount, down payment amount and property address.
Borrowers will need to provide documents to verify income and employment, such as W-2 forms and pay stubs, as well as bank and retirement account statements, and other records.
You’ve shopped around for the best FHA lenders, comparing rates and fees before choosing an offer. Here’s what to do when you’re ready to apply:
1. Complete a loan application. Keep on hand information about your income, debt and cash for a down payment. Whether you apply by phone or online, the lender will request supporting documents to verify your finances. Examples of what you may need for the application include tax returns and W-2 forms from the last two years, bank statements from the previous 60 days, retirement account and other statements, recent pay stubs and proof of other income.
2. Allow the lender to check your credit. The lender will make sure you meet the minimum credit score requirement and provide an FHA loan preapproval.
3. After you apply, the lender must give you a loan estimate within three business days. This is a standard form all lenders use to provide information upfront about your estimated interest rate, monthly mortgage payment and closing costs. The estimate will allow you to compare loan offers – the same loan type, term and amount – on equal footing and find the best deal.
4. Wait for the loan to go through underwriting. The underwriter will review your application and supporting documentation to make sure you meet the requirements for an FHA loan.
Shop around to find the best FHA mortgage lender to meet your needs. When looking for the best FHA home loan, consider these criteria:
- Product type. Look at loan types and terms that lenders offer, and see if they have the right loan to meet your needs.
- Interest rate. Compare annual percentage rates, or APRs Because this figure includes your interest rate as well as points and other fees, the APR will be higher than the interest rate and is a more accurate measure of a loan’s true cost. Even slightly lower interest rates can equate to thousands of dollars saved over the life of a loan.
- Closing costs. Expect to pay 2% to 6% of your loan amount in closing costs. Some states offer programs for closing cost assistance, particularly for first-time homebuyers. Keep in mind that low closing costs and a high interest rate could cost more than higher closing costs and lower interest rates. Also, if you roll closing costs into your loan’s monthly mortgage payment, remember that you will pay interest on those costs.
- Customer service reviews. Read reviews for FHA mortgage lenders to find out what’s good – and not so good – about them. Check the Consumer Financial Protection Bureau complaint database to learn about common problems with lenders.
FHA loans can offer many benefits to the right borrower, but be sure to explore all of your mortgage options. Possible alternatives include:
- USDA loans. The U.S. Department of Agriculture offers direct loans and guaranteed loans to eligible borrowers. Buyers generally won’t need to make a down payment.
- VA loans. Much like the FHA insures FHA loans, the Department of Veterans Affairs guarantees loans from private VA mortgage lenders. Qualified borrowers can get loans with no down payment, but keep in mind that private lenders often require a credit score of at least 620.
- Fannie Mae and Freddie Mac conventional loans. Borrowers who have higher credit scores but want to make a low down payment may also consider conventional loans. Your down payment could be as low as 3%.
- Down payment assistance programs. If you are considering an FHA loan because you can’t afford a bigger down payment, you can look into down payment assistance programs. Options may include grants and second mortgages.
- Lender-specific programs. Lenders may offer special programs or promotions that reduce the cost of borrowing.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For mortgage lenders, we take into account each company’s customer service ratings, interest rates, loan product availability, minimum down payment, minimum FICO score and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
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where offers appear on the site but do not affect any editorial decisions,
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