Review current FHA mortgage rates for December 1, 2022. The table shows FHA rates next to conventional loans so you can see the difference in interest rates, fees, APR and monthly payment. FHA rates vary based on multiple factors including your mortgage program and loan length. We recommend that you change the options in the refine your search menu to view updated FHA rates and monthly payments based on your individual loan amount, loan type, down payment and other inputs. We advise you to contact at least five lenders as shopping for your mortgage is the best way to find the FHA loan with the lowest rate and fees.
December 1, 2022
The FHA Program offers multiple benefits to borrowers although there are also extra program costs to consider. Below we highlight what you should focus on when you compare FHA mortgage rates.
FHA Mortgage Rates Are Lower. FHA mortgage rates are typically .125% - .500% lower than the current interest rate on a conventional loan or low down payment mortgage program. This is because FHA loans are backed by the federal government plus borrowers are required to pay an ongoing FHA Mortgage Insurance Premium (MIP) which protects lenders against default or foreclosure. Lower risk for lenders means they can offer you a lower mortgage rate. Paying a lower rate reduces your monthly payment and saves you money in interest expense.
The APR is Higher. The APR and closing costs for an FHA mortgage are higher than for conventional loans because you are required to pay a one-time FHA MIP fee at closing. This fee can be thousands of dollars depending on your mortgage amount, loan-to-value (LTV) ratio and other factors. The FHA MIP fee is why the APRs listed in the lender table above are so high and is one of the main drawbacks of an FHA loan.
FHA Loans Are Provided By Regular Lenders. The FHA Mortgage Program is administered by HUD, a government agency, but loans are provided by approved lenders such banks, mortgage brokers and credit unions. This is why it is important to compare multiple FHA lenders to find the best mortgage terms like you would with any other type of loan.
Less Variation Due to Credit Score. Although applicants with lower credit scores tend to pay higher mortgage rates, the difference in rates between borrowers with good and not-so-good credit profiles with an FHA loan is not as significant as compared to other programs. This enables borrowers with imperfect credit to still take advantage of relatively low FHA rates.
The main benefit of the FHA mortgage program is that it enables borrowers to buy a home with a down payment as low as 3.5% of the property purchase price. This compares to 10% - 20% down payment required to buy a home with most conventional mortgage programs. Borrowers can also combine the FHA program with a down payment assistance program or closing cost grant to further reduce the personal financial contribution they are required to make to buy a home. The FHA program charges borrowers additional up-front and ongoing fees but makes home ownership more attainable, especially for low-to-moderate income borrowers. The low down payment requirement also makes the FHA program an attractive financing option for first-time buyers.
The borrower qualification requirements for the FHA mortgage program are more flexible than for other low or no down payment mortgage programs. For example, lenders have more discretion when applying debt-to-income ratios to determine what size mortgage borrowers can afford. The higher the debt-to-income ratio, the larger the mortgage the borrower can afford. Borrowers with good credit scores, significant financial reserves or additional sources of income that are not included in their loan application may be able to qualify for a higher mortgage amount with the FHA program.
The FHA mortgage program is available to all borrowers that qualify. There are no borrower income limits although there are limits on loan amounts available through the program. Additionally, the program applies to all eligible properties, up to four units in size, as long as the borrower occupies the property.
The FHA program requires that borrowers have a minimum credit score of only 580 if you make a down payment between 3.5% and 10.0% and a score of only 500 if you make a down payment of at least 10%. The credit score requirement for an FHA mortgage is one the lowest of all no and low down payment loan programs. If you have a ding on your credit report or your score is not as high as you want it to be, you still may be able to use the FHA Program to buy a home.
Eligible applicants can combine an FHA mortgage with a down payment assistance program to buy a home with minimal personal financial contribution. You are still required to put 3.5% down to qualify for the FHA program but the source of funds can be from a down payment grant or even a personal gift. Coming up with the funds to pay for a down payment and closing costs can be challenging even for FHA borrowers so you should consider down payment and closing cost assistance programs to help you get over this financial hurdle.
Unlike some other no or low down payment mortgage programs, you can use the FHA mortgage program to finance the purchase of a home located anywhere in the United States as well as certain U.S. territories. Some programs require that you buy a home located in certain counties or census tracts to qualify or receive favorable loan terms, which potentially limits who can use the program. The widespread availability of the FHA program means borrowers have access to it no matter where they live.
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Use our FHA Mortgage Qualification Calculator to determine what size FHA loan you can afford as well as the required up-front and ongoing FHA Mortgage Insurance Premium
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"Buy a Home." Federal Housing Administration. U.S. Department of Housing and Urban Development, 2019. Web.