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5 Tips for Finding the Best FHA Mortgage Lenders

April 26, 2018
Mortgage Process, Mortgages
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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.

Check out our complete list of the best FHA mortgage lenders by category, or browse our short list below.

FHA mortgage lenders with the best online experience

Trade in the pile of FHA paperwork for secure uploads and email updates.

4.5 NerdWallet rating
  • 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
3.0 NerdWallet rating
  • 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.

4.5 NerdWallet rating
  • 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

PNC Mortgage

3.5 NerdWallet rating
  • Allows debt-to-income ratio up to 45%
  • Online loan application tracking
  • Upload documents from computer, tablet or phone
  • PNC Mortgage review

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.

4.0 NerdWallet rating
  • 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
4.5 NerdWallet rating
  • 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

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.

1. Know your credit score.

FHA is looking for borrowers with a credit score of at least 500. But if you want to get an FHA loan with a down payment as low as 3.5%, you’ll need a 580 FICO or above.

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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2. Shop more than one FHA lender.

You want to do this not only because one lender may be a bit more lenient in qualifying a borrower than another, but also because FHA mortgage rates can be all over the place.

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.

» MORE: 5 tips for finding the best mortgage lender

3. Know the difference between FHA mortgage insurance premiums and lender fees.

FHA-backed loans require mortgage insurance, to help cover the costs of loan defaults. FHA mortgage insurance premiums are uniform. You’ll pay the same premiums at Bank A as you will at Credit Union B. Lender fees are not the same from lender to lender.

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.”

4. Look for the APR.

Another way to consider how much you’re paying in fees is to do a head-to-head comparison of annual percentage rates among lenders.

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.

Or both.

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.

5. Find the right FHA lender for your situation.

Some lenders are built for an online experience, while others are best suited for face-to-face service. That’s why we’ve broken down the best FHA lenders in a variety of circumstances.

Best lenders for FHA loans: summary

More from NerdWallet

NerdWallet’s selection of mortgage lenders for inclusion here was made based on our evaluation of the products and services that lenders offer to consumers who are actively shopping for the best mortgage. The six key areas we evaluated include the loan types and loan products offered, online capabilities, online mortgage rate information, customer service and the number of complaints filed with the Consumer Financial Protection Bureau as a percentage of loans issued. We also awarded lenders up to one bonus star for a unique program or borrower focus that set them apart from other lenders. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.