We evaluated 10 well-known Federal Housing Administration (FHA) lenders, and after a careful review identified three of the best options. We analyzed consumer reviews, government data and industry insights. Three lenders stood out from the competition: Quicken Loans, CitiMortgage and PennyMac.
In this guide, we’ll discuss FHA loans, how they work and their benefits. With this approach, we’ll help you find the best FHA lender based on your individual needs.
- If you can put 20 percent down, you’ll avoid paying PMI
- Get pre-approved for an FHA loan so you know what you can spend before you start looking at properties
- Pay down your debt and avoid new debt before and during the FHA loan process
Tips for a Wise Buyer
We’re here to help you streamline your search for the best FHA lender so you can begin the process of finding the perfect home for you and your family. Let’s take a look at four tips to help you choose the right lender.
Benefits of an FHA loan
An FHA loan usually is easy to obtain, but this type of loan is not right for everyone. The benefits of an FHA loan include minimal down payment and lower credit score requirements. On the other hand, an FHA loan requires borrowers to pay mortgage insurance premiums, which protects the lender in the event a borrower defaults on the loan obligation.
Review your home loan options
FHA lenders can teach you about FHA loans, help you determine which type of home loan is right for you and explain the requirements associated with these mortgage loans.
Improve your credit score
Your credit score is a three-digit number related to how likely you are to repay debt. An excellent credit score is around 720 or higher, whereas an undesirable credit score is 620 or lower. The average credit score in the United States, tracked since 2005, reached an all-time high of 695 in 2017.
FHA lenders use your credit score to determine whether they will approve your loan application. If a lender accepts your FHA loan application, your credit score is also used to determine the mortgage amount offered. The FHA stipulates a borrower must have a credit score of 580 or higher to qualify for a loan. However, there are instances where a borrower can still receive an FHA loan if he or she has a credit score between 500 and 579.
Request a free copy of your credit report
Three credit bureaus – Equifax, Experian and TransUnion – create credit reports using different scoring models. These reports account for a variety of factors, including how long you have had credit, how much debt you have and your payment history. Consumer advocate Clark Howard explains how to get a free annual copy of your credit report from each of these bureaus as not all free credit report websites are truly free. If you check your credit report, you can determine whether you are a viable candidate for an FHA loan.
Compare FHA lenders
There is no shortage of available FHA lenders across the United States. When you shop for an FHA loan, compare the loan options provided by banks, credit unions and online lenders. Pay close attention to estimated closing costs, mortgage rates, lender fees and other terms and conditions.
Evaluate multiple lenders
Remember, an FHA lender can help you select an FHA loan and explain loan requirements in easy-to-understand terms. A lender also can offer insights into different FHA loan products, explain first-time homebuyer programs and provide support throughout the loan approval process. Consider these four things when choosing an FHA lender:
What kind of lender do you want? – Smaller lenders are more customer service oriented. They’ll most likely offer a more personalized experience than a large lender. Large lenders are solely focused on getting you the right interest rate and getting you through the process as quick as possible.
Get personal recommendations – Ask friends, family members and co-workers who have bought a home in the last few years who they recommend.
Ask your real estate agent – A quality real estate agent won’t limit lender recommendations to just their in-house lenders. Additionally, quality loan officers take good care of customers recommended by real estate agents. Speak with the lender and make sure they know you were referred by your real estate agent.
Look into the lender’s reputation – No matter how you choose a lender, be it from friends, family or a co-worker, vet them yourself. Check online reviews, past clients and ask questions to learn as much as possible about them.
Perhaps most important, you should feel comfortable with the FHA lender you choose. A home purchase is one of the most significant transactions you will complete in your lifetime. If you feel uncomfortable with a lender, discuss your concerns before you finalize your loan decision.
Get pre-approved for an FHA loan first
Pre-approval for an FHA loan provides an accurate idea of the mortgage you can afford. Getting pre-approved enables you to enter the housing market with a budget in hand and makes your home offers more appealing to sellers.
Get pre-approved for an FHA loan
To get pre-approved for an FHA loan, you will first want to meet with an FHA lender or you can submit your loan application online. You will need to provide the lender with tax returns and W-2 forms for the past two years, as well as pay stubs, bank account information and asset and investment records.
Our search for the best FHA Lenders
1. We researched an extensive list of top FHA lenders
2.We evaluated the FHA lenders based on our expert-guided buying criteria, including home refinancing, credit guidelines, and customer experience
3. We provided you the best FHA lenders for consideration
After our evaluation, we chose the three best FHA lenders: Quicken Loans, CitiMortgage and PennyMac. Each of these companies stood out during our research process. We used the U.S. Department of Housing and Urban Development (HUD) Lender List Search to find FHA lenders. Our search included lenders in all states and across all group sizes.
To narrow our search, we examined FHA lender reviews from Bankrate, U.S. News & World Report, Zillow and other prominent publications.
Finally, We focused on finding FHA lenders based on our wise buyer criteria. We evaluated the different types of FHA loans provided by each lender, how each lender handles pre-approval requests and other points of comparison. We removed FHA lenders failing to provide multiple types of FHA loans from consideration. Also, if an FHA lender did not provide online resources to teach homebuyers about FHA loans, we excluded it from our search.
Best Home Refinancing
Quicken Loans is the nation’s largest FHA lender, providing FHA loans with fixed-rate terms of 15, 20, 25 and 30 years. For those who prefer an adjustable-rate mortgage, Quicken Loans offers a five-year adjustable-rate option as well.
Screenshot: Quicken Loans Refinance Calculator.
If you are looking to refinance your mortgage, Quicken Loans is likely an excellent choice. Quicken Loans provides an online refinance guide, which includes a six-step process to help you determine if now is an ideal time to refinance. It also offers a refinance calculator to show you what your future mortgage payments will amount to if you decide to refinance.
Quicken Loans assists first-time homebuyers with a guide that teaches what they need to know about purchasing a home. The Quicken Loans mortgage calculator determines how much your mortgage payments will be before starting a home search. QLCredit is an online app that helps homebuyers understand and track their credit score to avoid problems that could interrupt the home buying process.
Best Credit Guidelines
If you’re on the lookout for an FHA loan with flexible credit guidelines, CitiMortgage is ideal. CitiMortgage’s priority is helping home buyers with low credit scores as well as those with a limited employment history. Plus, CitiMortgage is happy to provide FHA loans to self-employed buyers and home buyers who want to make a down payment of 20 percent or less.
CitiMortgage is committed to providing the highest-quality mortgage products to homeowners. As part of its mission, CitiMortgage offers SureStart®, a free mortgage pre-approval process. SureStart® is accessible online and enables homebuyers to apply for a mortgage and check the status of a mortgage application any time they choose.
CitiMortgage helps homebuyers take the guesswork out of purchasing or refinancing a home by offering three online calculators. The CitiMortgage mortgage payment calculator enables homebuyers to view monthly mortgage payments based on their loan amount, interest rate and loan term. A mortgage loan calculator is available to help buyers determine how much to borrow based on the amount they can afford to pay each month and a home affordability calculator allows home buyers to decide how much home they can reasonably finance based on income, monthly expenses and other factors.
Best Online Experience
PennyMac is a leading provider of FHA purchase loans and refinancing options. It supports more than one million home loan customers, many of whom select the lender’s FHA loans.
With PennyMac, borrowers enjoy competitive rates and superior service. PennyMac is a Zillow 5-Star Lender and earned an A+ rating from the Better Business Bureau (BBB). It is all about “A.R.E.” in its day-to-day operations: Accountable for performance excellence, Reliable in exceeding customer expectations and Ethical in how PennyMac does business.
PennyMac’s borrower support sets it apart from other FHA lenders with online chat or phone options, ensuring a prospective borrower can receive instant assistance on a computer, mobile device, or via phone by calling or requesting a call from the lender at a convenient time.
Key Features of an FHA Lender
The following chart highlights the key features of the three best FHA lenders.
|15-, 20-, 25- and 30-year
fixed terms available
|Ideal for homebuyers
with lower credit scores
or limited employment history
requirement of 580
|Online chat and
|Refinance up to
97.75% of your
|FHA purchase and
|FHA Streamline for
|Calculators for home
Frequently Asked Questions about FHA Lenders
What is an FHA loan?
An FHA loan is a type of home loan provided by a private lender and backed by the federal government via the Federal Housing Administration. If a borrower fails to repay the loan, the FHA pays the lender. This type of loan allows lenders to make loans to people who have a lower credit score or a lower down payment.
How does an FHA loan differ from a conventional home loan?
There are several differences between the two types of home mortgages:
- Conventional home loan guidelines are more strict than those associated with FHA loans.
- The FHA ensures loan interest rates are more competitive than conventional rates.
- A conventional loan does not require an upfront mortgage insurance premium (UFMIP), whereas an FHA loan adds a UFMIP of 1.35 percent of the base mortgage amount to the loan balance.
- Conventional mortgage borrowers pay monthly private mortgage insurance (PMI) if they do not have a 20 percent down payment or until they have accumulated 80 percent equity in the property. PMI is mandatory for an FHA loan.
Are FHA loans common?
HUD reported the FHA endorsed more than 1.2 million mortgages in 2017. Among these mortgages, nearly 880,000 were home-purchase mortgages with an average total of approximately $195,000. In contrast, there was nearly $14.8 billion in overall mortgage debt outstanding in the United States as of the third quarter of 2017, according to the Board of Governors of the Federal Reserve System. From this total, major financial institutions held roughly $5.3 billion.
Who qualifies for an FHA loan?
FHA loan requirements include a minimum home down payment of 3.5 percent and a credit score of 580 or higher. A home buyer can still qualify for an FHA loan if his or her credit score falls between 500 and 579, but the minimum down payment requires 10 percent.
How long does it take to close on an FHA loan?
On average, it takes between two weeks to six months to close on an FHA loan. However, the underwriting and appraisal processes and other variables may affect how long it takes you to go from loan application to final approval and closing.
Can an FHA lender reject my loan application?
Unfortunately, yes. If your credit score is too low or you have too much debt, an FHA lender may reject your application. If your home does not meet HUD standards, you are trying to buy an unapproved condo or you recently filed for bankruptcy or had a foreclosure, your lender may reject your FHA loan application.
Conclusion on FHA Lenders
With a wide variety of FHA lenders across the United States, it’s smart to pay attention to things like FHA loan terms and conditions, interest rates and approval processes.
FHA loans offer low-interest rates, minimal credit score requirements and other advantages over conventional home loans. As such, FHA loans are top choices for many homebuyers across the United States. Differentiating one FHA lender from another can be difficult, and without the right lender for your situation, you risk missing out on an opportunity to buy a home at a budget-friendly price.
The three FHA lenders we chose represent the best of the best. We made our recommendations after conducting in-depth FHA lender research and analysis. Hopefully, our recommendations will help you obtain the funds you need to purchase your ideal residence.
The Best FHA Lenders
|1||Best Home Refinancing||Quicken Loans|
|2||Best Credit Guidelines||CitiMortgage|
|3||Best Online Experience||PennyMac|