Best FHA mortgage lenders in 2022

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If you don’t have the down payment savings to qualify for a conventional loan, an FHA home loan can make a big difference. FHA loans require as little as 3.5 percent down if you meet the credit score requirement, making them appealing to first-time homebuyers and others with limited funds for a down payment.

While FHA loans come with eligibility rules regardless of the mortgage lender you work with, the interest rate you qualify for and closing costs can vary. That’s why it pays to shop around carefully for an FHA mortgage lender. Bankrate has made this process easier for you by reviewing dozens of mortgage lenders based on several key criteria. Here is our guide to the best FHA mortgage lenders in 2022.


Methodology

To determine the best FHA mortgage lenders, Bankrate evaluated lenders based on several criteria, including cost (competitive FHA loan rates and low or no fees); availability of other low-credit or low-down payment loan programs; and scope of FHA loan offerings.


Best FHA mortgage lenders

New American Funding

New American Funding mortgage review

Loan products  Purchase and refinance; conventional, jumbo, FHA, VA, USDA, home equity line of credit (HELOC), investment property, flex-term, non-QM, reverse mortgage
Credit requirements  620 for conventional loans
Pros
  • Rapid prequalification
  • Rates listed online and updated daily
  • “I CAN” mortgage offers flexible repayment periods
  • Accredited by the Better Business Bureau (BBB) with an A+ rating
Cons
  • Lender fees not disclosed online
Highlights  New American Funding offers several FHA purchase and refinance options with competitive rates.

PNC Bank

PNC Bank mortgage review

Loan products  Purchase and refinance; conventional, jumbo, FHA, VA, USDA, HELOC, home equity loan, investment property, interest-only
Credit requirements  620 for conventional loans, jumbo loans and FHA loans; 640 for USDA loans
Pros
  • User-friendly digital mortgage application
  • Over 2,600 locations nationwide for in-person support
Cons
  • Branches only located in select states
  • Higher FHA credit score qualifying minimum
  • Low Trustpilot rating
Highlights  PNC offers homebuyer assistance grants of up to $5,000 to use towards closing costs.

Flagstar Bank

Flagstar Bank mortgage review

Loan products  Purchase and refinance; conventional, jumbo, FHA, VA, USDA, home equity loan, construction and renovation loans
Credit requirements  620 for conventional loans; 700 for jumbo loans; 580 for FHA loans
Pros
  • Online portal allows you to apply and monitor loan status
  • Get up to $5,000 towards the down payment or closing costs with the Flagstar Gift Program
  • No origination fee
Cons
  • Home equity loans not available
Highlights  Flagstar Bank has a variety of programs and grants to help make homeownership more affordable.

Carrington Mortgage Services

Carrington Mortgage Services review

Loan products  Purchase and refinance; conventional, FHA, VA, USDA, non-QM
Credit requirements  620 for conventional loans; 500 for FHA loans and VA loans; 550 for non-QM
Pros
  • Several first-time homebuyer and low-down payment loan options
  • Alternative credit data able to be considered for some borrowers
  • Loan products for borrowers with less-than-perfect credit
Cons
  • Mortgages not offered in Massachusetts and North Dakota
  • Home equity loan products not available
Highlights  Carrington Mortgage Services offers home loan products that are accessible to credit-challenged borrowers.

Bank of America

Bank of America mortgage review

Loan products  Purchase and refinance; conventional, jumbo, FHA, VA, HELOC
Credit requirements  620 for conventional loans; 680 for jumbo loans
Pros
  • Simple online preapproval process
  • Up to $10,000 in down payment assistance for select borrowers
  • Lender credit of up to $7,500 to buy down the interest rate or reduce closing costs for eligible applicants
  • Current rates published online and updated daily
Cons
  • USDA loans not available
  • Lending costs not disclosed online
Highlights  Select borrowers could obtain down payment and closing cost assistance through Bank of America’s affordable housing programs.

Who is eligible for an FHA loan?

You don’t have to be a first-time homebuyer to qualify for an FHA loan. However, FHA loans are ideal for first-time buyers, as they come with less strict underwriting criteria than a conventional loan, which means they could be easier to qualify for:

  • The borrower can have a credit score of 500 to 579 with a 10 percent down payment, or a credit score of 580 or higher with a 3.5 percent down payment.
  • The borrower must have a debt-to-income ratio (DTI) of no more than 43 percent. DTI ratio is the borrower’s monthly debt payments divided by their gross monthly income. (Note: Lenders typically calculate 0.5 percent of your student loan debt balances to determine your monthly student loan payment for the DTI calculation).
  • The borrower must have a front-end ratio (how much of their gross monthly income goes toward their mortgage payment) of no more than 31 percent.
  • The borrower must provide proof of employment history from the past two years.
  • The loan cannot exceed FHA loan limits: $420,680 in most areas, and $970,800 in higher-cost areas.
  • The loan must be for a primary residence only.
  • If applicable, the borrower must wait one year after a Chapter 13 bankruptcy, two years after a Chapter 7 bankruptcy and three years after a foreclosure before seeking an FHA loan.

Benefits of an FHA loan

  • FHA loans make it easier for lower-credit borrowers, lower- or moderate-income borrowers and borrowers with limited savings to purchase a home.
  • If you have a lower credit score, you could get a better rate with an FHA loan than you would with a conventional loan.
  • FHA loans come with fixed interest rates, which means your monthly mortgage payment stays the same for the duration of the repayment term.
  • FHA lenders cannot charge more than 3 percent to 5 percent of the loan principal in closing costs.

Drawbacks of an FHA loan

  • FHA loans require the borrower to pay two mortgage insurance premiums (MIP): one upfront that equals 1.75 percent of the loan principal; and an annual premium of 0.45 percent to 1.05 percent based on your loan term, amount borrowed and loan-to-value ratio (LTV) at the time the loan was made.
  • The FHA MIP can only be cancelled if you made a down payment of at least 10 percent, and only after 11 years.
  • FHA loans come in 15- or 30-year terms only — no flexibility.
  • There might be higher fees for an FHA loan than a conventional loan.

How to apply for an FHA loan

Most mortgage lenders and banks offer FHA loans, although their interest rates and fees can vary. Begin by comparing lenders and offers through Bankrate to find the best FHA mortgage lender for you.

Once you choose an FHA lender, you can either apply online, by phone or at a branch location, if available. In the application process, be prepared to furnish documentation, including bank statements, W-2 forms, pay stubs and other financial information, and also to provide additional information if requested.

Summary: Best FHA mortgage lenders

With additional reporting by Allison Martin

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