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For first-time homebuyers and borrowers with low credit scores or low incomes, FHA mortgages offer an affordable way to buy a home. Check out the latest FHA interest rates to see how much you could save on your monthly mortgage payment with one of these loans.
Current FHA Mortgage Rates
The average 30-year FHA interest rate in May was about 5.99%, 71 basis points lower than the average rate for a conventional 30-year mortgage, according to Zillow data.
In May, FHA interest rates increased 11 basis points from the previous month. So far this month, rates have been slightly lower.
Compare current FHA interest rates
Here's how current FHA loan rates compare to interest rates on other types of mortgages.
Mortgage Type Today's Average Interest Rates
This information is provided by Zillow. See more mortgage rates on Zillow. Zillow Real Estate
FHA vs. Conventional Rates
Interest rates on government-insured mortgages, like FHA loans, are typically lower than those on conventional mortgages, and because mortgage interest rates are still relatively high, getting an FHA loan and taking advantage of the lower interest rates that come with it can help borrowers save money each month.
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How FHA Loan Interest Rates are Determined
Mortgage interest rates are influenced by larger economic factors as well as a borrower's personal financial circumstances, including their credit score, debt-to-income ratio (DTI), and down payment.
FHA interest rates tend to be lower than conventional interest rates because the insurance attached to these loans gives lenders more protection against the risk of borrower default.
How to get good FHA loan rates
While you can't control the market trends that drive mortgage interest rates, you may be able to use your credit and financial standing to get a better FHA rate.
Improving your credit score and paying down debt to lower your DTI can have a big impact on the range of interest rates available to you, and saving up a larger down payment can also help.
It's also important to get pre-approved for mortgages from multiple lenders so you can compare offers to ensure you get the best terms.
What is an FHA loan?
A type of government guaranteed loan
An FHA loan is a type of government-insured loan. These mortgages are provided by private lenders, but a federal agency (in this case, the Federal Housing Administration) provides insurance for the loan. If the borrower defaults and the home is foreclosed, the FHA insurance covers the lender's losses.
advantage
Thanks to this insurance, FHA loans can be obtained with a lower credit score and smaller down payment than other types of mortgages, and lenders can also offer more favorable interest rates on these loans.
Qualifications
To get an FHA loan, you typically need:
Credit score of 580 or higher, down payment of 3.5% or more, DTI of 43% or less
With a 10% down payment, you may be able to qualify even with a credit score as low as 500. You may also be able to get an FHA loan with a higher DTI if you have compensating factors such as a cash reserve, which means you'll have money in your bank account to cover your monthly mortgage payment if you suddenly lose your source of income.
Advantages and Disadvantages of FHA Loans
Low down payment
Coming up with a down payment is a major hurdle for many prospective homebuyers, but with an FHA loan, you can put down just 3.5%.
Flexible Credit Guidelines
The credit requirements for FHA-insured mortgages are more lenient, making it easier for people with poor credit or high debt loads to buy a home. The low interest rates that accompany these loans also benefit borrowers.
Mortgage insurance can be expensive
However, FHA loans come with additional costs and can be more expensive for borrowers with good credit and larger down payments.
“Typically, interest rates on FHA loans are lower than those on conventional loans,” says Mason Whitehead, branch manager at Dallas-based Churchill Mortgage, “but this can be a bit misleading, because FHA closing costs and fees are much higher than a standard conventional loan.”
FHA loans come with both upfront mortgage insurance and annual mortgage insurance. The upfront mortgage insurance fee is equal to 1.75% of the loan amount. This fee can be paid at closing or rolled into the loan amount.
The annual amount of your FHA mortgage insurance premium is based on the loan amount, loan-to-value ratio, and term: If the minimum down payment for a 30-year mortgage is less than $726,200, you'll pay 0.55% of the loan amount each year.
“Monthly FHA mortgage insurance premiums are typically higher than conventional loans because they are a fixed rate regardless of credit score,” Whitehead says.
Mortgage Calculator
Our free mortgage calculator can help you compare monthly costs based on down payment, interest rate and home purchase price.
Mortgage Calculator
$1,161 Estimated Monthly Payment
Paying a 25% higher down payment would save you $8,916.08 in interest. Lowering your interest rate by 1% would save you $51,562.03. Paying an extra $500 per month would shorten the term of your loan by 146 months.
Frequently Asked Questions About FHA Interest Rates
Like all mortgage rates, FHA rates can fluctuate considerably from day to day (or even hour to hour), but FHA rates are generally lower than interest rates on other types of mortgages, making them a good deal for qualified borrowers.
A 3.5% down payment is the minimum allowed for an FHA loan, but you can put more down if you want. If your score is below 580, you'll need to put down at least 10% to qualify for an FHA loan.
Interest rates on FHA loans are typically lower than conventional loans and are often close to VA mortgage rates.
Yes, FHA interest rates vary from lender to lender, and although the Federal Housing Administration insures FHA mortgages, it does not set the interest rates lenders offer.
To get an FHA loan, you will need to apply for a mortgage with a lender that offers this mortgage.
Yes, you can refinance an FHA loan. If you're refinancing into another FHA loan, a simplified refinance may be possible. A simplified refinance doesn't require an appraisal or credit check. Many borrowers refinance their FHA loan into a conventional loan once they reach 20% equity, eliminating mortgage insurance.
FHA loans can only be used to finance the purchase of a property that you plan to live in as your primary residence, but you may be able to buy a property with up to four units, as long as you live in one of the units, and the remaining units can be rented out.
No, anyone can get an FHA loan, regardless of income, as long as they meet the loan’s credit requirements.
Molly Grace
Mortgage Reporter
Elias Shaya
Compliance Associate
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