Finding the best FHA mortgage lender isn’t necessarily an easy task. First off, you have to narrow down the field to Federal Housing Administration-approved lenders; not every lender offers them.
How to look for an FHA mortgage lender
Qualifying details, interest rates and loan terms vary from one lender to another. Here’s how to find the best FHA mortgage lender for you.
That’s just the first credit score hurdle: Lenders often tack on extra credit score requirements. So even though FHA may be looking for a 580, a lender might look for 600, 620 or better.
And FHA generally requires a debt-to-income ratio of 50% or less, but again, lenders can have even more stringent benchmarks.
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Lenders price their loans according to current market conditions, as well as mark up their interest rates due to business costs and profit targets. It’s like shopping for gas: One station may be much more expensive than a station right down the street.
You’ll get an official loan estimate within three days after you apply for a mortgage. This is a standard, government-mandated form that you’ll get from each lender. It makes it pretty easy to compare the terms and fees each lender is offering.
On the second page of the loan estimate, look for “closing cost details.” Then, under “loan costs,” see Section A, “origination charges.” That’s where you’ll find each lender’s total fees.
In this example, the first charge is labeled “.25% of loan amount (points).” These are discount points, which are purely an option you can take or leave to lower your loan’s interest rate. The “application fee” and “underwriting fee” are lender charges. You may see all kinds of fees here, with all kinds of names.
But other than discount points, lender fees are not a good thing and should be negotiated.
An upfront FHA mortgage insurance premium is shown in Section B, “services you cannot shop for,” or in the “other costs” column.
Ongoing mortgage insurance premiums, built into your monthly payment, will be on the last page of the loan estimate, under “projected payments.”
Your payment rate — the interest rate your monthly payment is based on — is shown on the front page of your loan estimate, under “loan terms.”
The annual percentage rate — which is your base interest rate plus all loan fees — is on the third and final page of the loan estimate, under “comparisons.”
Lenders make money by either charging you fees — such as origination fees, application fees and processing fees — or by building their profit into the interest rate you pay.
That’s why you want to consider your payment interest rate as well as your all-fees-included APR. Use NerdWallet’s mortgage APR calculator to help you see the difference between interest rate and annual percentage rate.
Best FHA mortgage lenders for first-time home buyers
These lenders are among the FHA leaders when it comes to loans for first-time home buyers.
- Ideal for borrowers with nontraditional credit
- Allows low down payments with relaxed financial requirements
- Offers a program with flexible credit guidelines for borrowers with lower credit scores
- CitiMortgage review
- Helps income-limited households find low-down-payment state bond programs for first-time buyers
- Offers three different construction loan programs
- Assists borrowers in determining areas that qualify for rural development mortgages
- Flagstar Bank review
FHA mortgage lenders with the best online experience
Trade in the pile of FHA paperwork for secure uploads and email updates.
- Embedded tips and relevant help provided within the application process
- Loan approval takes just minutes
- Income, employment and even property information are often pre-populated or downloaded automatically
- Rocket Mortgage review
- Complete and submit documentation online
- Offers FHA Streamline refinancing
- Allows current customers to refinance an FHA loan even if they owe more than their home is worth
- PennyMac review
Best FHA mortgage lenders for borrowers with nontraditional credit
If you have a short credit file, these lenders will consider nontraditional credit, such as utilities and rent payments.
- Works with borrowers to find state and local down payment assistance programs
- Doesn’t use an automated loan decision process, which may allow for more flexibility
- Offers English/Spanish bilingual assistance
- New American Funding review
Best lenders for FHA loans: summary
- CitiMortgage: Best for first-time home buyers
- Flagstar Bank: Best for first-time home buyers
- Rocket Mortgage: Best for online FHA mortgage experience
- PennyMac: Best for online FHA mortgage experience
- New American Funding: Best for nontraditional credit histories
- PNC Mortgage: Best for nontraditional credit histories
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