Buying a home can be a daunting task. However, there are programs in place for first-time homebuyers to make it a little easier.
One of the ways you can get a mortgage, even if you don’t have a big down payment or a perfect credit score, is the Federal Housing Administration (FHA) loan program.
Best FHA Lenders and Online Marketplaces
Here are some of the best FHA loan lenders, as well as marketplaces where you can easily compare your options.
loanDepot
You can live in any state and get access to an FHA mortgage through loanDepot.
LendingTree
One of the first places to look for an FHA mortgage is LendingTree, an online marketplace.
Quicken Loans
Over the years, Quicken Loans has become one of the most trusted lenders in the business.
New American Funding
Access to FHA loans is a hallmark of New American Funding, which offers several programs. With this company, you can even explore the possibility of an FHA renovation loan.
Flagstar Bank
In addition to allowing applicants to provide nontraditional trade lines for underwriting consideration, Flagstar Bank is also known for offering loan packages meant for professionals.
CitiMortgage
The mortgage arm of Citibank allows you access to the resources of one of the most recognized nationwide banks.
U.S. Bank
Another high-profile national bank, U.S. Bank offers several mortgage products. In addition to getting started online, you can also call a number and speak with a mortgage specialist — including someone near you.
Carrington Mortgage Services
It can be very difficult for borrowers with poor credit to take out a conventional mortgage. If your credit score is low due to financial mistakes in your past, then Carrington Mortgage Services may be a suitable option for you.
PennyMac
PennyMac is based in California and does have some brick-and-mortar locations, but the company is known for its superior online services. The company is considered one of the top five lenders in the U.S.
Reali
If you live in a state serviced by Reali, you could close on your FHA loan in as little as 13 days. That’s much faster than many mortgage closing timeframes.
How do FHA loans work?
Understanding FHA loans can help you buy a home that you can afford. Here’s what you need to know about getting an FHA loan and the best FHA lenders.
FHA loans are backed and guaranteed by the federal government. The government doesn’t actually make the loans, though. Instead, FHA loans are actually originated by individual FHA loan lenders who are approved by the government. The Federal Housing Administration backs the loans so lenders feel more comfortable with borrowers that might seem to present something of a higher risk.
Down Payment Requirements
With an FHA loan, you can put down as little as 3.5% for a down payment if you have a minimum credit score of 580. Additionally, there are FHA loans available for those with even lower credit scores, as long as they put down 10% of the purchase price.
You apply for an FHA loan much as you would in any other mortgage loan. The FHA lender will still review your credit history, income information, and other factors. Ultimately, this determines whether you’re approved, how much you can borrow, and your interest rate. You’ll have to pay for private mortgage insurance during your FHA loan, though, so be aware of that added cost.
Before you choose a mortgage lender, though, it’s important to compare your options. Just as you can with any other loan quote, you can shop around and compare offers from different FHA mortgage lenders. Start by looking at the best lenders for FHA home loans. That way you have a better chance of receiving terms that work best for you.
How to Find the Best FHA Lender
To find the best FHA-approved lender, you will want to compare quotes from multiple lenders. Once you have at least three or four FHA loan quotes, it’s time to compare them. You want to make sure you’re comparing apples to apples, though. Some of the items that you need to watch for in a loan offer include:
- Loan origination fees
- Interest rate (including whether it’s fixed or adjustable)
- FHA mortgage insurance
- Required down payment
- Length of loan term
- Closing costs
- Estimates for property tax and home insurance
Make sure the terms are roughly the same so you can make a good comparison. You might also want to see if your potential lenders are willing to run different scenarios if you’re willing to pay points.
Run the Numbers
You might need to run a few numbers on your own to determine which trade-offs are worth it. For example, one FHA mortgage lender might have no origination fees but charge a higher interest rate.
If interest rates are low enough, you might be better off working with an FHA mortgage lender that charges an origination fee.
Carefully consider these items, and look at the total cost of the loan. In the end, you want a loan that is likely to cost you the least amount of money, while still allowing you to afford your monthly payments.
