Best FHA Mortgage Lenders 2020

Yes, you can own a home. With the right FHA lender, get a low down payment and
your foot in the door.

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Credit Score
What is your personal credit score?
  • Excellent (720-850)
  • Good (690-719)
  • Fair (630-689)
  • Poor (350-629)
Loan Amount
How much do you want to borrow?

What are FHA Mortgage Loans?

FHA home loans are government-backed mortgage loans that give Americans with low credit scores or a lack of funds the opportunity to purchase a home with only a small down payment. 

As opposed to a traditional loan, 3 parties are involved in an FHA home loan: 

  • Borrower
  • Lender
  • Federal Housing Administration (FHA)

The FHA’s involvement provides security for both sides, reducing the lender’s risk and helping the borrower get approved for the loan. 

Why Take out an FHA Mortgage Loan?

From a home buyer’s perspective, the main reasons to apply for an FHA home loan are:

  •  If you’ve been rejected by traditional lenders
  •  If you don’t have sufficient money for a 20% down payment

FHA home loans provide borrowers suffering from a poor credit rating with a path to homeownership for a down payment of 10% or less. Active and former members of the Military, National Guard, and Reserves who suffer from poor credit or a lack of funds can apply for a VA loan. For anyone else who can’t get approved for a conventional mortgage, an FHA mortgage loan is usually the best type of loan for getting into the housing market. FHA loans are especially popular with first-time homebuyers, with 82% of first-time borrowers using an FHA loan in 2017.

How do FHA Home Loans Work? 

FHA mortgages are fixed-rate loans that the borrower must repay over a period of usually 15 or 30 years. These are the main points of difference between an FHA loan and conventional loan:

1) Low down payment: Under Federal Housing Administration rules, lenders can offer 2 tiers of FHA loans. Home buyers with a 580-619 credit score may take out an FHA loan with only a 3.5% down payment. Home buyers with a 500-579 credit score may take out an FHA loan with a 10% down payment. 

2) Private Mortgage Insurance: All borrowers must pay monthly PMI until they have paid off at least 20% of the value of their home. PMI consists of an upfront payment of 1.75% of the loan amount, plus an annual premium that varies from 0.45%-0.85% depending on several factors.

3) Maximum loan amounts: The FHA sets a maximum loan amount for each part of the country, based on median home prices for the area. In 2020, the maximum loan amount stands at $679,509 in the highest cost areas (located mostly in the Los Angeles, San Francisco, New York, and Washington, D.C. metro areas). The maximum stands at $294,515 in the lowest-cost areas.

What are the Pros and Cons of FHA Loans?

Low credit score requirementsMonthly PMI
Low down paymentsMore paperwork
Higher debt-to-income ratio allowedNot all properties qualify

The main benefits of an FHA home loan are that it carries far lower credit and down-payment requirements than a conventional loan. There are a few catches, namely that the borrower must pay monthly PMI (to insure the lender in the event of default). The borrower must also provide documentation to prove they meet all the additional FHA requirements. For example, total monthly payments must not exceed 30% of the borrower’s gross monthly income; and borrowers must not have filed for Chapter 7 bankruptcy in the past 2 years or Chapter 13 bankruptcy in the past year.

How to Choose the Best FHA Mortgage Lender

As with a regular home loan, there are many factors to consider when deciding which lender to apply to for an FHA home loan.

  • What interest rate is being offered? 

Whether you’re shopping around for an FHA loan, conventional home loan, or any other type of loan, always compare the interest rate and APR offered by the different lenders. FHA mortgages are fixed rate, meaning the rate stays the same over the entire term. The lower the APR, the less you’ll pay over a 15-year or 30-year term. A 0.05% or 0.10% difference between rates mightn’t sound like much, but this could translate to thousands or tens of thousands of dollars over the life of your loan.

  • What additional fees are there? 

Like a regular mortgage, FHA home loans can carry closing costs ranging from around 2%-5% of the value of the loan. Closing costs can vary significantly between lenders, so in addition to comparing APRs, it is always worth asking for an estimate of closing costs before deciding.

  • What level of customer service does the lender offer? 

Like with any big loan, it’s important to read up about the lender and check them out online or by phone before signing below the dotted line. When comparing lenders, check to see that they have expertise in providing FHA mortgage loans, that their online reviews are mostly positive, and that they have an open door when it comes to communication.

FHA Mortgage Loans vs Other Low Down-Payment Options

If FHA loans aren’t your thing, here are some government-backed or conventional loan options to consider.

Government-backed loans: Active and former members of the U.S. Military, National Guard and Reserve, as well as spouses of veterans who died in service or as a result of a service-related injury, may take out a VA loan provided they meet the other eligibility requirements. With a VA loan, a borrower can purchase a house for little or no down payment and without having to pay PMI, although there are some trade-offs, including the need to pay certain closing costs.

Conventional loans: If you’re purchasing your first house or have low to moderate income, your lender might be able to offer one of Fannie Mae’s My Community Mortgage loans for a down payment of as low as 3%. Like FHA loans, these loans require the borrower to pay PMI, but other conditions vary—meaning that in certain cases, the loan could work out cheaper than an FHA loan.

The Top Lenders for FHA loans

1. LendingTree 

  • Compare multiple FHA mortgage lenders

  • Lower rates than direct lenders

  • Pre-qualify in minutes

LendingTree is an online marketplace that allows users to compare and prequalify for mortgage products from dozens of top lenders with just one online form. The service is completely free to use, and home buyers can use it to apply for FHA home loans or any other type of mortgage loan. After filling out a short online form, you’ll be brought to a screen displaying your best loan offers. Simply select your preferred option and the lender will get in touch with you to complete your application.

Standout feature: All-in-one online form for comparing the best FHA mortgage lenders

Read the full LendingTree review


LendingTree LendingTree View Rates

2. QuickenLoans

  • Verified approval and low FHA rates

  • FHA fixed-rate loan for first-time buyers with under 20% down payments

  • Fast application process

Quicken offers a large range of mortgage and refinancing loans, including reverse mortgages, specialist VA and USDA mortgages, refinancing options, and a unique YOURgage option. Quicken promises to use cutting-edge technology to guide borrowers to the best loan product and complete the loan approval process quickly. Quicken stands out for offering home equity loans for almost every possible scenario so that you can find a suitable home financing package speedily, whatever your needs.

Standout feature: FHA mortgages with lower credit requirements

Read the full QuickenLoans review

Quicken Loans

 Quicken Loans Quicken Loans View Rates

3. Rocket Mortgage

  • Lock in your rate for 90 days

  • FHA loan experts available 24/7

  • Fast advanced platform

Rocket Mortgage is fully designed for digital natives with an advanced and smooth loan platform that keeps the entire process online and on smartphones. There are plenty of mortgage options and rates are constantly updated to keep borrowers on top of the details. The site design and apps are sleek and easy to use with excellent customer service and automation to speed up the loan process.

Standout feature: FHA application syncs with your bank

Read the full Rocket Mortgage review

Rocket Mortgage

Rocket Mortgage Rocket Mortgage View Rates