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FHA Loan Rates

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FHA Loan Rates

An FHA loan usually requires the lowest down payment when purchasing a home, only 3.5% of the sales price. It also allows for lower scores than conventional loans, usually down to a 580. You may be able to roll your closing costs in to your loan. The home must be the borrower's primary residence. FHA is often the best loan program for first time home buyers. If you already have an FHA loan, you can refinance with FHA Streamline to lower your interest rate.

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Have you decided to purchase your home with a mortgage backed by the Federal Housing Administration (FHA) and want the lowest possible FHA loan rates? Many homeowners make the mistake of assuming that because the mortgage loan is backed by the government they don’t have to shop around for the lowest FHA loan rates. Truth be told, FHA loan rates and fees can vary widely from one mortgage lender to the next. Comparison shopping interest rates from as few as three different lenders can literally save you thousands of dollars. Here are several tips to help you get approved for lower interest rate on your next home loan.

How to Get the Lowest FHA Mortgage Rates

If you’ve done any research on FHA home loans you know that you’ll be required to purchase mortgage insurance. This insurance protects lenders from the higher risk and certain losses from foreclosure that comes with FHA qualified borrowers. Where does the risk come from?

The main advantage of FHA home loans is that you can qualify with credit scores as low as 580. Additionally, if you meet the credit score requirements you can purchase a home using an FHA home loan with a down payment as low as 3.5 percent. This combination of low credit and down payment requirements results in significant risk for lenders.

To offset this higher risk and keep the program going the FHA requires borrowers purchase mortgage insurance that protects lenders from certain losses if you default on your FHA home loan. This FHA mortgage insurance has premiums that must be paid when you close and with your monthly payments. These premiums result in higher payments. While it’s not possible to avoid paying annual mortgage insurance premiums with your home loan you can control the interest rate and therefore lower your payment amount.

How to Get the Lowest FHA Mortgage Rates

The process of applying for government backed home loans isn’t that much different from applying for a conventional home loan. You need to meet minimum credit score requirements and document sufficient income for an acceptable debt ratio.

Lenders typically use pay stubs or w-2s to document income. If you struggle to document sufficient income due to self employment or investment income there are stated income programs that can get you approved using bank statements.  

Lastly the property you are purchasing must be owner occupied and your primary residence to qualify for the program.

You may already be familiar with FHA program requirements. If your credit score is 580 or better you only have to put down 3.5 percent at closing. If your credit score is less than 580 the FHA requires a down payment of 10 percent. This is significantly less that traditional home loans require at 20 percent down. Is it possible to improve your credit score and pay a higher down payment to get a lower interest rate?

Absolutely, you can quickly improve your credit score by paying down the balances on your credit cards and avoiding making late payments. Request copies of your credit reports and carefully review each report for errors. If you find errors you will need to dispute them and allow enough time for the correction to be reflected in your credit score. 

Put more money away into a savings account so you’ll be able to pay a higher down payment at closing. These are all things you can do to make sure you’re getting the lowest FHA interest rate possible and keep your monthly payments down despite the added cost of mortgage insurance.

Is your head spinning yet from all this talk of insurance and current FHA mortgage rates? We have loan specialists standing by that can help you get the lowest possible interest rate on a FHA mortgage that will help meet your financial goals.

Comparison Shopping for Lower Rates

The Department of Housing and Urban Development (HUD) recently stated that the average homeowner saves $3,000 over the life of the mortgage by comparing at least 3 quotes from different lenders. Investing a little legwork or even enlisting the help of a mortgage broker can literally save you thousands of dollars. Interest rates and fees vary widely even if you have good credit. Having credit challenges in the past make comparison shopping even more important.

FHA Mortgage Loan Options

There are several factors that affect how much your payment amount will be. The interest rate you qualify for on your FHA home loan is the most important; however, the term length and rate type you choose can also raise and lower your payment. Choosing a longer term length of 30 years over a 15 year mortgage will get you a lower payment but will also build equity at a slower rate.

Taking out an adjustable interest rate over a fixed rate can also lower your payment, but not without risks. If FHA interest rates today go up significantly your payment could skyrocket when the lender adjusts your loan. This is called payment shock and is one of the risks of using an adjustable rate mortgage.

The benefits of government backed mortgage loans for homeowners with credit challenges or lacking the necessary down payment outweigh the higher cost that come with mortgage insurance premiums. 

Are you ready to get started with today’s lowest mortgage rates for your next home loan? Contact one of our dedicated mortgage specialists for the help you need choosing the best loan to meet your financial goals on the path to homeownership.