4 Ways to Get the Lowest FHA Mortgage Rates

If you are looking to get the best FHA mortgage rate possible, there are several steps you will want to take. FHA home loans are backed by the Federal Housing Administration (FHA) and are designed to help more home buyers qualify for mortgage loans. Not everyone is an ideal candidate for a conventional mortgage loan. FHA loans are great for first-time buyers and those borrowers who may have a lower credit score and/or less money to put down toward a home purchase. FHA loans offer competitive mortgage rates and lower down payments compared to conventional home loans. 

fha mortgage rate

Here are 4 of the best ways to qualify for the lowest FHA mortgage rates:

  1. Improve Your Credit Score

Your FICO score will go a long way in determining which home loan program(s) and mortgage rates for which you qualify. The good news about FHA loans is that they allow borrowers with lower credit ratings to qualify for a mortgage. However, that doesn’t mean you should disregard the importance of your credit score. The lower your score, the lower your FHA mortgage rate could be. Perform a credit check first and understand your current rating. 

You might qualify for an FHA loan with a FICO score as low as 500 per FHA guidelines, but you should aim to get your rating as high as possible before applying for any mortgage loan. A higher score will be to your advantage. Figure out what your score is and take steps to improve it before buying a home. This will help you qualify for a lower FHA mortgage rate.

  1. Make a Larger Down Payment

One advantage of FHA loans is that you can buy a house with a lower down payment. FHA loans generally require a minimum down payment of 3.5% of the purchase price. Conventional loans will require higher down payments. Again, it is to your benefit to make the largest down payment you can comfortably afford. A higher down payment will help you qualify for a better FHA mortgage rate. It will also reduce (and possibly eliminate) mortgage insurance (PMI) payments that will be part of your monthly mortgage bill. These PMI payments will be required until you pay off a certain percentage of the loan principal amount, typically 20%.

  1. Reduce Your Debts

Another way to get your finances in order before applying for an FHA loan is to focus on paying down existing debts. Your debt-to-income ratio (DTI) is a significant factor in qualifying for a mortgage loan. Your lender will calculate your current DTI by adding up your total monthly debt payments. This includes credit cards, student loans, car loans and other personal debts. This total will be divided by your monthly income (before taxes). Lenders are generally looking for DTIs lower than 50%. The lower your DTI, the better chance you have of qualifying for an FHA loan with a great interest rate. 

  1. Talk with an FHA-Approved Lender

Not all mortgage lenders and banks are certified by the FHA. This may limit your loan eligibility options. Make sure you are talking with an FHA-approved mortgage lender. Feel free to talk to multiple lenders to find the best rate and terms. Ask them about first-time home buyer programs that may be available in your state and take the time to get pre-approved for your FHA loan. 

Mortgage pre-approval will enable you to lock in the best possible interest rate. It will also allow you to know how much home you can afford, estimate monthly mortgage payments and give you an advantage when making purchase offers. Home sellers like to see buyers who are pre-approved for their mortgage loans and in good financial standing, especially in today’s ultra-competitive seller’s market.

If you have questions about FHA mortgage loans or want to get started on your home loan pre-approval to lock in the lowest FHA mortgage rate, contact Moreira Team | MortgageRight today. We are an FHA-approved lender and we’ll help you explore all your mortgage loan options to determine the best borrowing solution.