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Published: Oct 19, 2022 3 min read

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

FHA Rates

As of Nov 26, 2022 - Dec 2, 2022

ProductInterest Rate
FHA Fixed 30 Year7.05%
FHA Loan Mortgage Refinance Rates

As of Nov 26, 2022 - Dec 2, 2022

ProductInterest Rate
FHA Fixed 30 Year7.46%

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.

Pros
  • 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.
Cons
  • 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?

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First-time home buyers with possibly a thinner credit history could benefit from this type of loan, given its flexibility in terms of down payment and FICO score. Those with lower incomes who don't meet the DTI ratio for a conventional loan, even if they don't have much debt, could also benefit from the higher DTI threshold and the lack of a limitation on income.

How can I qualify for an FHA loan?

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To qualify for an FHA loan you will need to be able to put a minimum of 3.5 down, but in order to qualify for this minimum down payment, a minimum FICO score of 580 is required. If your FICO score is lower than 580, you will not be automatically excluded from eligibility, but a 10% down payment will be required. Your DTI can be as high as 50%. Your DTI ratio consists of all your monthly debt payments — including your new mortgage — divided by your gross monthly income.

How do FHA rates compare with other mortgage rates?

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Usually, the rate for an FHA loan will be more favorable than its conventional counterpart. However, you should also consider other factors, such as the mortgage insurance requirement, which can be bypassed with a 20% down payment on a conventional loan. On an FHA loan, you cannot bypass or otherwise remove mortgage insurance from the equation.

How can I find the best FHA mortgage rates?

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You'll have to compare different lenders to get a personalized rate since these may vary by lender. You may consider looking at a comparison of several different lenders to get an idea of which may be right for you. Remember that not all lenders offer FHA loans, so be sure to make that your opening question.

What are FHA loan limits?

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For context, in 2022 the conforming loan limit for most of the country is $647,200 and for high-cost areas is $970,800. The FHA defines high-cost areas as those where 115% of the local median home value exceeds the baseline conforming loan limit, and the conforming loan limit in these areas is set at 150% of the standard conforming loan limit. FHA loan limits for 2022 are $420,680 for most of the country (or 65% of their conventional counterparts) and $970,800 for high-cost areas.

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.