Since 1934, Federal Housing Administration (or FHA) loans have helped Americans realize their homeownership dreams. With government backing, FHA loans offer more favorable terms for low- and moderate-income homebuyers, as well as first-time homebuyers.
Current FHA mortgage rates
What is an FHA loan?
An FHA loan is a type of mortgage that is backed and regulated by the federal government. One misconception is that the government issues FHA loans. In actuality, you still get your loan from a mortgage lender, but the FHA insures it, providing an extra layer of security to the lender if you cannot meet your payments.
You must fulfill certain requirements to get an FHA loan, such as a minimum FICO score of 580 and a minimum down payment of 3.5%. In addition, not all properties qualify for an FHA loan, but if you are eligible and your proposed purchase is approved, an FHA-backed loan may be right for you.
FHA loan pros and cons
With every mortgage product, there are several points to consider. There is no one-size-fits-all product, and an FHA Loan may or may not be your best option. To help you decide, here are some points both for and against going with an FHA loan for your financing needs.
- They have more flexible requirements, such as a lower FICO score and a higher debt-to-income (DTI) ratio.
- You can use gift funds to cover the entire down payment.
- Sellers can contribute up to 6% for the closing costs.
- There are no income limits.
- You can only use the loan to purchase a primary residence.
- Mortgage insurance is mandatory.
- The property you are purchasing must be FHA-approved.
- The FHA sets the loan limits.
FHA vs. conventional loans
Contrary to FHA loans, the federal government does not insure conventional loans. Because of the government backing, FHA loans get more favorable terms than conventional ones. On the other hand, conventional loans provide some flexibility you don't get with an FHA loan.
You can use a conventional loan to purchase a second or third home, including investment properties. If you’re able to put 20% down, there’ll be no need for mortgage insurance. If you can’t, you'll be required to keep the insurance up until you’ve achieved 20% equity. In addition, properties aren’t limited to FHA-approved listings.
FHA loan FAQs
When is an FHA loan worth it?
How can I qualify for an FHA loan?
How do FHA rates compare with other mortgage rates?
How can I find the best FHA mortgage rates?
What are FHA loan limits?
What makes our data different?
Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States over the last 7 days. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.
Disclaimer: We try to keep our information current and accurate. However, interest rates are subject to market fluctuations and vary based on your qualifications. Calculator results assume a good credit score and factor-in regional averages; your actual interest rate may differ. Calculator results are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making any personal financial decisions.