Best mortgage lenders for FHA loans in August 2023
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BLUEPRINT
Updated 2:01 a.m. ET Aug. 1, 2023
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If you have less-than-perfect credit or a lower income, getting a mortgage backed by the Federal Housing Administration (FHA) could be a great option. The best FHA loan lenders are the ones that do the most to help borrowers in this situation become homeowners.
These companies set themselves apart from the rest by offering competitive annual percentage rates (APRs), more lenient credit score and debt-to-income (DTI) requirements, relatively quick closing times and more.
If you think an FHA loan might be your best shot at homeownership, here are five top lenders to consider.
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Better
: Best overall
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Rocket Mortgage
: Best for a fully online process
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Chase
: Best for on-time closing
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Bank of America
: Best for discounts
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PNC Bank
: Best for borrower education
Best FHA loan lenders
Compare the best mortgage lenders for FHA loans
Why some lenders didn’t make the cut
Of the 14 mortgage lenders that we reviewed, only a fraction made the cut. The lenders that didn’t have high enough scores to be included received lower ratings mostly due to having a lack of transparency around credit score and DTI requirements as well as preapproval and closing timelines. Some of the excluded lenders also had limited customer service options and poor customer reviews.
Methodology
Our expert writers and editors have reviewed and researched 14 popular lenders to help you find the best FHA loans. Out of all the lenders considered, the five that made our list excelled in areas across the following categories (with weightings): loan cost (30%), eligibility and accessibility (20%), customer service (20%) and ease of application (30%).
Within each major category, we considered several characteristics, including minimum APR, maximum allowed DTI ratio, minimum credit score requirements and applicable fees. We also evaluated each provider’s customer support options, borrower perks and features that simplify the borrowing process—like time to close and preapproval time.
How to qualify for an FHA loan
These are the minimum requirements you’ll need to meet to qualify for an FHA loan:
- Min. credit score: 500 (borrowers with scores of 580 or above can make smaller down payment).
- Min. down payment: 3.5% with 580+ credit score; 10% with 500 to 579 credit score.
- Max DTI ratio: Typically 50% or less, depending on the lender.
- Min. income: None, but current income must be reasonably likely to stay consistent for the first three years of repayment.
What disqualifies you from an FHA loan?
If you don’t meet the FHA credit requirements, you won’t qualify for an FHA loan. “A borrower must have a minimum FICO [score] of 580 to get an FHA loan with 3.5% down,” says Joe Parsons, senior loan officer with Pinnacle Home Loans in Novato, California. “FHA will go as low as 500 if the borrower puts 10% down.”
Specific items in your credit history might also disqualify you. “[If you’ve] filed [for] Chapter 7 bankruptcy within 24 months, [you] will not be able to get an FHA loan,” Parsons says. “Someone who has filed [for] Chapter 13 bankruptcy can get a loan subject to the approval of the Trustee. The borrower must document at least 12 months of on-time payments to their repayment plan.”
The minimum credit score to get an FHA loan is 500; however, with a score this low, you’ll have to make a down payment of 10%. If you have a score of at least 580, you can make a down payment as low as a 3.5%.
Keep in mind that these are the FHA’s minimum requirements. Some lenders might impose their own higher requirements, such as a minimum credit score of 620.
You can find the best rate on an FHA loan by comparing APRs from multiple lenders—APR factors in both interest rates and closing costs, so you’ll have a better idea of the total cost. Closing costs can be significant (typically 2% to 6% of your loan amount), so you don’t want to forget about them when evaluating who offers the best rate.
Mortgage rates also change multiple times a day, and the rate you actually get will depend on your unique circumstances. For example, your credit score, DTI ratio, down payment and location will all influence the rate you receive.
The lowest down payment for an FHA loan is 3.5%. However, remember that you’ll need a credit score of at least 580 to qualify to make the minimum down payment.
“The money [for a down payment] can come from the borrower’s own funds, a gift from a relative or from a recognized down payment assistance program,” Parsons says. “Some of these programs are administered by state agencies. Others are city and county programs.”
Other possible forms of assistance can be grants, forgivable loans, zero-interest loans or silent seconds, a type of second mortgage with no monthly payments or balloon payments, according to Parsons. These programs usually require a credit score of at least 620 and a lower DTI ratio.
“Anyone looking for down payment assistance can search with the terms ‘DPA’ and the name of the state and city or county,” Parsons says.
Many states also offer their own programs to help borrowers with homeownership. For example,the California Housing Finance Agency and the Texas Department of Housing and Community Affairs.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
