TEX SALE, SHORT SALE, FHA_Best_VA_Mortgage Loans - REVIEWSWhen it comes to purchasing a home, there are many different types of sales and mortgage loans to consider.
Two common types of sales are the TEX sale and the short sale. TEX sale refers to a tax exchange sale, which allows homeowners to defer paying taxes on the capital gains from the sale of their primary residence. On the other hand, a short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance.
This can be a good option for homeowners who are facing financial difficulties and cannot afford to keep up with their mortgage payments.
In addition to the different types of sales, there are also various mortgage loans available to homebuyers. This includes FHA and VA loans, which are popular options for first-time homebuyers and members of the military. FHA loans are insured by the Federal Housing Administration and are designed to help borrowers with lower credit scores and smaller down payments.
VA loans, on the other hand,
are guaranteed by the Department of Veterans Affairs and are available to active-duty service members, veterans, and eligible surviving spouses.
When it comes to choosing
the best mortgage loan for your needs, it's important to do your research and read reviews from other homeowners who have used the same loan program. Reading reviews can provide valuable insights into the application process, customer service, interest rates, and overall experience of working with a particular lender. By taking the time to research different loan options and read reviews, you can ensure that you are making an informed decision that will benefit you in the long run.
One of the key advantages
of TEX sales is the ability to defer paying taxes on the capital gains from the sale of your primary residence. This can be particularly beneficial for homeowners who are looking to downsize or move to a new location.
By taking advantage of a TEX sale, homeowners can potentially save thousands of dollars in taxes that they would have otherwise had to pay.
However, it's important to consult with a tax professional or financial advisor before entering into a TEX sale to fully understand the implications and benefits.
On the other hand, short sales can be a good option for homeowners who are struggling to make their mortgage payments and are at risk of foreclosure.
By selling their property for less than the outstanding mortgage balance, homeowners can avoid foreclosure and potentially walk away with some cash in their pocket.
While short sales can have a negative impact on a homeowner's credit score,
they are generally less damaging than foreclosure
and can help homeowners move on from a difficult financial situation.
When it comes to choosing the best mortgage loan, FHA and VA loans are popular options for many homebuyers.
FHA loans are especially attractive for borrowers with lower credit scores and smaller down payments, as they offer more flexibility and leniency compared to conventional loans. VA loans, on the other hand, are a great option for members of the military and veterans who are looking to purchase a home with little to no money down.
In conclusion,
TEX sales, short sales, and FHA_VA mortgage loans are important tools for homebuyers and homeowners who are looking to buy or sell a property.
By understanding the differences between TEX and short sales and researching different mortgage loan options, you can make an informed decision that will benefit you financially in the long run. Remember to read reviews from other homeowners who have used the same loan program
to get a better understanding
of the application process
and overall experience of working with a particular lender.
By taking the time to do your research and seek advice from professionals, you can navigate the homebuying process
with confidence
and peace of mind.
Best FHA Loan Lenders Of May 2024
Natalie Campisi,
Deborah Kearns
Senior Staff Writer, Mortgages Expert
Chris Jennings
Deputy Editor, Loans & Mortgages
Reviewed
Updated: May 1, 2024, 12:58pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Loans backed by the Federal Housing Administration, or FHA loans, are popular among first-time home buyers because they come with more generous credit score and down-payment requirements than other home loans. Keep in mind that FHA loans are not just for first-time home buyers; repeat buyers and homeowners seeking to refinance also can take advantage of this loan option.
Forbes Advisor selected lenders that offer competitive interest rates, low APRs, discounts, or a combination of all these features. The lenders we compiled for this list had a minimum 4-star rating, according to our analysis.
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Show Summary
Best FHA Loan Lenders of May 2024
Forbes Advisor compiled a list of FHA loan lenders that excel in various areas, including offering competitive loan options, a flexible application process and hands-on help. Mortgage rates for each lender were based on recently advertised market rates and compared to the national average. The lenders we included on this list had a minimum four-star rating.
Guaranteed Rate: Best for Low Lender Fees
PNC Bank: Best For Ease Of Access
LoanDepot: Best for Applying Online
Guild Mortgage: Best For Quick Closing Times
Bank of America: Best For Competitive Interest Rates
Mr. Cooper: Best For Closing Guarantees
BEST FOR LOW LENDER FEES
Guaranteed Rate
5.0
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
1 to 2 days
Lower than the national average
21 to 30 days
Editor's Take
Pros & Cons
Lender Details
BEST FOR EASE OF ACCESS
PNC Bank
5.0
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
20 to 30 minutes
Lower than the national average
45-day average
Editor's Take
Pros & Cons
Lender Details
BEST FOR APPLYING ONLINE
LoanDepot
4.5
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
15 minutes
Similar to the national average
20 days
Editor's Take
Pros & Cons
Lender Details
BEST FOR QUICK CLOSING TIMES
Guild Mortgage
4.0
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
1 to 3 days
Does not publicly disclose
17-day average
Editor's Take
Pros & Cons
Lender Details
BEST FOR COMPETITIVE INTEREST RATES
Bank of America
4.0
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
Preapproval letter takes 10 days to receive
Lower than the national average
30 to 45 days
Editor's Take
Pros & Cons
Lender Details
BEST FOR CLOSING GUARANTEES
Mr. Cooper
4.0
Compare Rates
Compare rates from participating lenders in your area via Bankrate.com
1 to 3 days
Above the national average
30 to 45 days
Editor's Take
Pros & Cons
Lender Details
Summary: Best Mortgage Lenders for FHA Loans
COMPANY | FORBES ADVISOR RATING | PREAPPROVAL TIME | MORTGAGE RATES | DAYS TO CLOSE | LEARN MORE |
|---|---|---|---|---|---|
| 5.0
| 1 to 2 days | Lower than the national average | 21 to 30 days | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
| 5.0
| 20 to 30 minutes | Lower than the national average | 45-day average | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
| 4.5
| 15 minutes | Within 1 to 3 basis points above or below the national average | 20 days | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
| 4.0
| 1 to 3 days | N/A | 17-day average | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
| 4.0
| Preapproval letter takes 10 days to receive | Lower than the national average | 30 to 45 days | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
| 4.0
| 1 to 3 days | 3+ basis points above the national average | 30 to 45 days | Compare RatesCompare rates from participating lenders in your area via Bankrate.com |
Tips for Comparing FHA Loans
To choose the best FHA loan, consider these factors when shopping around with different lenders:
Credit score. Lenders may require a credit score higher than the FHA’s minimum requirement. Most lenders require a credit score between 580 and 620.
Down payment. It’s possible to put down as little as 3.5% with a minimum credit score of 580 when using an FHA loan. A 10% down payment or higher is necessary with a credit score between 500 and 579.
Mortgage insurance premiums. All FHA loans charge upfront and annual mortgage insurance premiums (MIPs), although the amount differs depending on how much you put down. If you put 10% down, you can cancel MIPs after the first 11 years; any less, and you’ll have to MIPs for the life of the loan.
Debt-to-income ratio. Lenders prefer a debt-to-income (DTI) ratio at or below 43%, although the limit can vary by institution.
Interest rates. FHA loan rates vary by mortgage lender. It’s worth the effort to apply to several lenders and see what type of rate you qualify for. Further, use this opportunity to compare fees to forecast total borrowing costs.
Repairs and improvements. Properties needing extensive repairs or renovations before moving in may require an FHA 203(k) loan instead of the standard 203(b) loan that’s intended for move-in ready homes.
What Is an FHA Loan?
The FHA is a government agency that came into being during the Great Depression, when home lending froze and new construction stalled.
The FHA’s mission is to improve the quality of the country’s housing stock and provide mortgage insurance to lenders to make homeownership for low- to moderate-income borrowers more accessible, helping prospective home buyers get into homes for less money upfront.
Though the FHA insures and regulates FHA loans, it doesn’t do the actual money-lending. Approved private lenders provide FHA loans to borrowers, and the FHA regulates and insures those loans. Anyone can apply for FHA loans, though they tend to be popular among those who can’t get approved for a conventional mortgage.
How Do FHA Loans Work?
FHA loans work much like any other mortgage. You can get a 15-year or 30-year loan term with a fixed or adjustable interest rate from an approved FHA mortgage lender.
You’ll need to meet certain credit and income standards to qualify, though, and the home has to appraise for at least as much as the purchase price.
FHA loans are insured by the FHA. With this government guarantee, lenders limit their losses whenever a borrower defaults on their loan. Borrowers help pay for this guarantee through upfront and monthly mortgage insurance premiums. The guarantee makes FHA loans generally easier to qualify for than conventional loans.
Types of FHA Loans
The FHA guarantees several types of loans that serve different purposes, including:
FHA loan for purchase. A standard FHA purchase loan allows you to buy a primary residence with one to four units.
FHA streamline refinance. This loan lets you refinance an existing FHA loan without an appraisal and, in some cases, without a review of your income or credit.
FHA cash-out refinance. An FHA cash-out refinance requires a home appraisal and a review of your credit and income. It works much like a conventional cash-out refinance, allowing you to replace your existing loan with a larger loan and get the difference back as cash.
FHA 203(k) loan. This home renovation loan lets you borrow money to make home improvements that are expected to boost your home’s value.
FHA Energy Efficient Mortgage: FHA borrowers can utilize this program to borrow money for energy-efficient home renovations, such as a new furnace or cooling system, insulation for an attic or crawl space, or energy-efficient windows.
FHA Loan Rates
One of the benefits of FHA loans is that the interest rates can sometimes be lower than conventional mortgages because, as government-backed loans, lenders view FHA loans as less risky. However, your monthly mortgage payment is more than the interest rate, so always meet with several lenders to compare all associated costs to determine the best deal.
Something else to keep in mind is that FHA loan interest rates can change daily based on market conditions, so it’s a good idea to keep a watchful eye on FHA loan rates to see how they’re trending before you meet with mortgage lenders.
FHA Loan Requirements
If you are a first-time home buyer, someone with a low credit score or you only have limited funds to put towards a down payment, it may be worth looking into an FHA loan. Here’s a list of requirements to be eligible for an FHA loan:
Minimum credit score of 500
At least a 3.5% down payment based on the purchase price (with a minimum credit score of 580)
Documentation supporting income and employment
Property standards must meet FHA minimum criteria
Must have a DTI ratio of 43% or less
Must pay mortgage insurance premiums (upfront fee and annual premium)
Property must be borrower’s primary residence
No recent bankruptcies, foreclosures or similar negative financial events
FHA Loan Limits
FHA loan limits are determined on an annual basis and typically rise to keep in step with home price appreciation. They’re calculated at 65% of the Federal Housing Finance Agency’s new conforming loan limits, which are the limits for Freddie Mac- and Fannie Mae-backed loans.
As of January 1, 2023, the new FHA loan limit for the calendar year for single-family homes in most U.S. counties rose from $420,680 to $472,030—a more than 12% increase. Borrowers in higher-cost areas can borrow at a higher figure, known as the “ceiling” limit. The new ceiling limit for the calendar year is $1,089,300. Alaska and Hawaii have their own designated loan limit, which is now $1,633,950.
The benefit of higher FHA loan limits is that borrowers have more flexibility to consider a wider range of potential homes. It’s worth noting that not all borrowers will be eligible for the cap. The size of a loan will depend on other key criteria such as credit score, DTI and down payment size.
Pros and Cons of FHA Loans
Here are the main advantages and disadvantages of FHA loans that you should be aware of if you’re considering this type of mortgage.
Pros
Minimum down payment is just 3.5%. This is much lower than the traditional 20% down payment, though some conventional loans allow just 3% down.
Low credit score requirement. An FHA loan may be attainable with a credit score below 620. FHA guidelines allow scores as low as 500 with 10% down and as low as 580 with 3.5% down. However, individual lenders may set tighter guidelines.
Can be refinanced without requalifying. The non-credit-qualifying FHA streamline refinance loan could help you lower your monthly payment with reduced closing costs and limited documentation. Few other loans offer this benefit, which can be especially helpful if you want to refinance when your home has decreased in value or you’ve lost your job.
DTI can go as high as 50%. Your DTI ratio can be as high as 50%, according to FHA guidelines, if you have a higher credit score or cash reserves. This is another standard that lenders can decide to tighten, however.
Cons
Must pay monthly mortgage insurance premiums. If you put down less than 10% on an FHA loan, you’ll have to pay monthly mortgage insurance premiums for the life of the loan. You can drop the private mortgage insurance on a low-down-payment conventional loan once your equity reaches 80%, in many cases.
Upfront mortgage insurance premium isn’t cheap. Along with monthly mortgage insurance premiums, FHA borrowers must pay an upfront premium of 1.75% of the loan amount. This premium can be rolled into the loan and financed or paid in cash at closing.
Lower loan limits than conventional conforming loans. The single-family home loan limit for a conventional conforming mortgage in 2023 is $726,200. For an FHA mortgage, it’s $472,030 in most areas. (Limits for both loan types increase in places with a higher cost of living.)
Only available for primary residences. You can’t get an FHA loan to buy a second home or an investment property.
How To Apply for an FHA Loan
Applying for an FHA loan is as much about advance planning as it is about the process of applying itself. Let’s take a look at what you can do before you apply to set yourself up for success and what to expect during the application process:
Determine your budget. Look at your financial situation and decide realistically how much you can afford to borrow.
Review your credit score. Though FHA loans are more flexible with regard to credit scores compared to conventional loans, a stronger credit score typically puts you in a better position for lower interest rates. So, take steps where you can to improve your credit score, such as paying down existing debt.
Assemble key documents. When applying for an FHA loan, you will need to provide a number of documents, such as tax returns and W-2s from the past two years, recent bank and investment account statements and your Social Security card.
Shop for an FHA-approved lender. Don’t go with the first FHA lender you meet. Each lender will offer different rates and some may have more lenient policies or offer lower closing costs and fees. So take the time to compare lenders—at least three—to save yourself money. To find an FHA-approved lender, use the U.S. Department of Housing and Urban Development’s lender list.
Select lenders and submit applications. This is where all the documents you saved in advance come in and how lenders determine if you meet eligibility criteria.
Compare loan estimates and fees for the best deal. Lenders are required to provide loan estimates with estimated interest rates and APRs within three business days of your application submission. When comparing loan estimates between lenders, make sure you’re comparing apples to apples—so the same loan type, term and amount.
Underwriting phase. Once you move forward, an underwriter will review your loan. They will examine all of your documents and your financial health, determine your DTI and confirm your employment and income.
Home appraisal. The lender will schedule an appraisal to determine the market value of the home.
Schedule a home inspection. Though not required, you should schedule a home inspection as well once you receive the purchase agreement to make sure there are no surprise issues with the property. If you uncover problems, you can ask the seller to resolve them before you close.
If you are well-organized and there are no delays, you can generally expect the FHA loan process to take between 30 to 45 days from application to closing.
Alternatives to FHA Loans
FHA loans make it easier for certain buyers to qualify for home financing thanks to the program’s flexible credit and down payment minimums. However, there some alternatives require no down payment and can potentially offer more competitive rates and fees.
FHA vs. Conventional Loan
FHA loans are generally easier to qualify for than conventional loans as they have lower credit score requirements and more lenient DTI limits. FHA interest rates also tend to be lower.
On the other hand, conventional loans don’t require mortgage insurance if you can put down at least 20%, giving you a lower monthly payment. They’re also viewed more favorably by sellers, so you’re more likely to have your offer accepted when using one versus an FHA loan.
FHA vs. USDA Loan
USDA loans don’t require any money down to buy or build a home in an eligible rural area. Additionally, this program’s upfront and annual guarantee fees are lower than FHA mortgage insurance premiums.
To qualify, you must have a low to moderate income that doesn’t exceed 115% of the median household income. Another potential hindrance is that USDA mortgage lenders typically require a minimum 640 credit score.
FHA vs. VA Loan
The primary perks of a VA loan include no down payment and no ongoing mortgage insurance premiums. Instead, you’ll pay a one-time VA loan funding fee plus other costs at closing.
While the VA doesn’t set a minimum credit score, most VA mortgage lenders require a score between 580 and 620—similar to FHA mortgage lenders.
Methodology
Forbes Advisor reviewed 12 mortgage lenders that do business both online and in-person throughout the United States. The lenders we reviewed represent some of the largest mortgage lenders by volume, which include banks, credit unions and online lenders.
Our scoring methodology included capturing more than 10 data points, which covered interest rates, lender fees, loan types, discounts, accessibility and borrower requirements.
The best lenders for FHA borrowers excelled in areas that are historically important for this group including low- to average-credit score requirements, low lender fees and low interest rates.
The following is the weighting assigned to each category:
Loan costs. 30%
Speed. 20%
Credit requirements. 20%
Loan types offered. 20%
Access and availability. 10%
Specific characteristics taken into consideration within each category include APR, average interest rate, origination fees, minimum credit score requirements, discounts and customer service availability.
We also offered bonus points up to 5% of the score when a lender considers alternative credit data.
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Frequently Asked Questions (FAQs)
How do you get rid of the mortgage insurance premium on an FHA loan?
How many FHA loans can you have?
How often are FHA loans denied in underwriting?
Why is my credit score important?
How much house can I afford?
What is mortgage insurance?
How do I get preapproved for a mortgage?
How much money do I need for a down payment?
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
Natalie Campisi
Senior Staff Writer
Natalie toggles between news stories and enterprise reporting to bring timely personal finance topics to readers. Her mission is to help inform people of all financial backgrounds about events that may affect their financial futures. Her work has appeared in numerous publications such as CNBC, Bankrate, Buzzfeed, ABC Action News, The Chicago Tribune, The Associated Press and the Tampa Bay Times. She’s appeared on various podcasts and news shows to discuss personal finance topics, including Nasdaq’s Trade Talks.
Deborah Kearns
Mortgages Expert
With two decades of experience as a respected journalist and communications leader in the mortgage field, Deborah Kearns is passionate about helping consumers make smart homeownership and personal finance decisions. Her work has appeared in The New York Times, USA Today, Associated Press, Forbes Advsior, Yahoo Finance, CNBC, MarketWatch, Money, NerdWallet and Bankrate. She has held several leadership roles in digital newsrooms and with top mortgage and real estate companies.
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Zestimate®: $635,700901 E Washington Street
Colton, CA 92324