Best FHA Lenders: Get Help Buying Your First Home

If you’re a first-time homebuyer or are struggling to get approved for a conventional mortgage, a loan through the Federal Housing Authority (FHA) just might be your ticket to homeownership. FHA loans often allow higher debt-to-income ratios than traditional mortgages (up to 57%) and lower minimum credit scores (as low as 500).

You can find FHA loans at many banks, credit unions, and online lenders. But which should you choose? The LendEDU team performed extensive research to find the six best FHA lenders. Below, we’ll tell you what we like and dislike about each company, so you can find your top pick. 

Reviews of the best lenders for FHA loans

SoFi, Rocket Mortgage, Quicken Loans, and Navy Federal Credit Union are the best FHA lenders for first-time or current homebuyers. These lenders generally accept down payments as low as 3.5% and credit scores as low as 500 or 580 for FHA loans.

SoFi

Rocket Mortgage

Quicken Loans

How do FHA mortgage lenders work?

FHA mortgage lenders offer home loans insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development (HUD). 

FHA loans help make homeownership possible for borrowers struggling to get approved for a conventional loan due to lower credit scores, higher debt-to-income ratios, recent bankruptcies or foreclosures, or other issues.

The main difference between FHA loans and conventional mortgages is that the government backs FHA loans, so lenders have an extra layer of protection if you default on the loan. 

Also, you’re required to pay mortgage insurance premiums even if your down payment is 20% or more. MIP includes an upfront premium (1.75% of the loan amount) and an annual premium (0.45% to 1.05%). You pay the upfront premium at closing and the annual premium monthly with your mortgage payment.

Can I get an FHA loan from my bank?

You can get an FHA loan through all types of lenders—banks, credit unions, and even online mortgage companies. Many traditional institutions offer FHA loans alongside conventional mortgages, so you can likely find FHA options at your local bank or credit union.

Eligibility requirements for FHA loan applications

Qualifying for an FHA loan is generally easier than qualifying for a conventional mortgage. The HUD sets the eligibility requirements for FHA loans. The main requirements are: 

Requirement	Details
Minimum credit score	580 with a minimum 3.5% down payment; 500 with a minimum 10% down payment
Minimum down payment	3.5% – 10% depending on credit score
Maximum debt-to-income (DTI) ratio	43%; 57% if your credit score is at least 620
Property type	Must use the loan to purchase a one-to-four-unit primary residence

FHA loans don’t have income restrictions, but you will need proof of steady employment. You can often apply with a co-applicant even if they don’t live in your home. 

Gathering documentation such as pay stubs, tax returns, and bank statements beforehand can help you prepare to apply for an FHA loan. 

Are gift funds allowed on FHA loans?

The FHA allows you to use gifted funds for your down payment. “Gifted” means this money is coming from someone, such as a family member, employer, charitable organization, or government agency, with no obligation for you to repay them. You’ll need a gift letter stating you don’t need to repay the money.

How to apply for an FHA loan

Applying for an FHA loan is similar to applying for a regular mortgage. Your FHA-approved lender will guide you through the process, which often looks like this: 

1. Check your credit score. If your score is between 500 and 579, you’ll need to save up for a minimum 10% down payment. If your credit score is 580 or higher, you’ll need just 3.5%. 
2. Shop around for FHA-approved lenders. The best FHA lenders let you get preapproved, so you can see what type of rate and loan amount you’ll qualify for before applying. You can compare your preapprovals side-by-side to find the right lender.
3. Find a home that meets FHA requirements. With your preapproval in hand, you can start shopping for properties within your budget. Work with a real estate agent experienced with FHA loans to find the right property.
4. Submit an application. Once you’ve found a home you like, follow the steps on your chosen lender’s website to apply. This is also where you’ll provide all the financial documentation needed to complete underwriting.
5. Wait for your appraisal. The HUD requires all properties to undergo an FHA appraisal to assess their value and ensure they meet FHA standards. You’ll also need an inspection to identify any potential issues. 
6. Get your closing documents. If all goes well, your lender will send you the closing documents to review at least three business days before the actual closing. Take your time reviewing this paperwork.
7. Close on your new home. At closing, you’ll pay your closing costs (unless you roll them into your loan or have the seller pay them), finalize your paperwork, and get the keys to your new place. After this, you’re officially a homeowner. 

Our expert warns: Be aware of these common misconceptions about FHA loans

Erin Kinkade

CFP®

The primary misconceptions are that you can obtain an FHA loan on any residence and that no down payment is required. Another misconception is that even though the U.S. government backs the FHA mortgage, it does not mean it will protect your credit score or report if you miss or make late payments. The home can be foreclosed on. Many owners don’t realize that the FHA loan can be assumed, which means another individual can take over the loan without a home appraisal or paying additional closing costs. However, the individual assuming the loan must go through a credit check and provide their financial documentation to prove they are trustworthy and able to pay the FHA mortgage.

Pros and cons of working with an FHA-approved lender

Consider the pros and cons of this type of mortgage.

Pros

• Easier to qualify for than a traditional mortgage

  You can qualify with a credit score as low as 500 with a 10% down payment or 580 with a 3.5% down payment. You may also be eligible for an FHA loan even if you’ve had a recent bankruptcy or foreclosure.

• Potentially lower interest rates

  Because the government backs FHA loans, you may get a lower interest rate than you would with a non-government-backed conventional mortgage.

• Not just for first-time homebuyers

  A common misconception is that FHA loans are just for when you’re buying a house for the first time. But you can qualify for one even if you own a home or have previously owned one.

• Several refinancing options

  If you ever decide to refinance your FHA loan down the line, you can look into the FHA Streamline refinance to adjust your rate or term, FHA cash-out refinance to pull equity out of your home, or an FHA 203(k) loan for home renovations.

Cons

• Mortgage insurance premiums may last your entire repayment period

  FHA loans have mandatory MIP that lasts for your entire loan if you put less than 10% down or for 11 years with at least 10% down. This is different from conventional loans, where you can remove private mortgage insurance (PMI) with 20% down.

• Maximum loan amounts apply

  FHA loan limits vary by location and property type but are generally $498,257 for single-unit properties in lower-cost areas and $1,149,825 in higher-cost areas for 2024.

• FHA loans have property restrictions

  FHA loans can be used only for primary residences in most cases. Also, the property must be a one-to-four-unit house, townhouse, condo, mobile, manufactured, or modular home.

Tip

Many lenders and communities offer down payment assistance programs to low-to-moderate-income FHA loan borrowers. These programs are designed to help with down payments, closing costs, and other fees.

Is an FHA loan right for you?

Asking yourself these questions can help you determine whether an FHA loan is right for you: 

Consider an FHA loan if…	Reconsider an FHA loan if…
✅ Your credit score is lower than 620, and it’s difficult to qualify for a conventional mortgage.	❌ You have a credit score above 620 and can qualify for a conventional mortgage with better terms.
✅ You have a limited down payment (3.5% to 10%).	❌ You can afford a down payment of 20% or more to avoid PMI.
✅ Your debt-to-income ratio is higher than 43% (but below 57%).	❌ You’re looking to purchase an investment property or a second home
✅ You’re a first-time homebuyer or a current homeowner looking to purchase a primary residence.	❌ You’re looking to purchase a home that exceeds the FHA loan limits in your area.

FAQ

How do I know where to apply for an FHA loan?

To find the right place to apply for an FHA loan, start by researching banks, credit unions, and online lenders that offer FHA loans. Check for FHA-approved lenders because not all institutions offer these types of loans. 

Consider comparing their rates, fees, customer service records, and ease of the application process. Online reviews and testimonials can also provide insight into borrower experiences. Consulting with a mortgage broker can help you identify lenders that best suit your financial situation and home-buying goals.

Do banks offer FHA loans?

Yes, many banks offer FHA loans. These loans are government-backed, which allows banks to offer them with lower risk. Large banks, including Wells Fargo, Chase, and others, typically provide FHA loans, as do smaller banks and credit unions. However, verifying that any lender is FHA-approved before proceeding with an application is essential.

What should I look for in an FHA lender?

When looking for an FHA lender, consider the following factors:

• Approval status: Ensure the lender is approved by the FHA.
• Interest rates and fees: Compare rates and fees across various lenders to find the most cost-effective options.
• Customer service: Good customer service can affect your experience, especially as a first-time homebuyer. Look for lenders that offer robust support and resources.
• Reputation: Check the lender’s reputation through reviews and ratings. Past customer experiences can provide valuable insights into what you might expect.
• Loan processing times: Find out how long it takes the lender to process and close an FHA loan. Timing can be crucial in competitive housing markets.

Are FHA rates the same for everyone?

No, FHA rates are not the same for everyone. The government backs FHA loans, but individual lenders set their rates, which can vary based on the borrower’s credit score, loan amount, and down payment. Moreover, market conditions influence the rates offered at any given time. Shop around and compare rates from several lenders to ensure you’re getting the best deal available.

What will disqualify you from an FHA loan?

Certain factors can disqualify you from obtaining an FHA loan, including:

• Low credit score: While FHA loans are more lenient, a credit score below 500 generally disqualifies you. Scores between 500 and 579 may require a higher down payment.
• High debt-to-income ratio: It will be difficult to qualify if your debt-to-income ratio exceeds 57%.
• Foreclosure or bankruptcy: Recent foreclosures (within the last three years) or bankruptcy (within the last two years without good credit re-established) can disqualify you.
• Delinquent federal debt: Having delinquent federal debts, such as student loans or tax obligations, without a repayment plan can lead to disqualification.
• Fraud or misrepresentation: Any fraud or misrepresentation in your loan application can result in immediate disqualification and legal consequences.

When applying for an FHA loan, ensure you meet all the eligibility requirements and provide accurate, truthful information on your application.

How we picked the best FHA lenders

Since 2019, LendEDU has evaluated mortgage companies to help readers find the best mortgages. Our latest analysis reviewed 228 data points from 12 lenders and financial institutions, with 19 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of the best FHA lenders