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30-Yr fixed 4.750 % 0.7 to 1
15-Yr fixed 3.750 % 0.7 to 1
5/1 ARM 3.125 % 0.7 to 1
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Qualify for a FHA Insured Loan

For the past few years, mortgage rates on new and refinanced mortgages have fallen to incredibly low levels which have never been seen before. While rates on adjustable rate mortgages and fixed mortgage deals are incredibly low, a potential borrower needs to be aware that they must comply with various FHA standards in order to qualify for a FHA insured loan.

In order to get the lowest rates on fixed mortgage deals, borrowers will first need to comply with the FHA’s debt ration limits. To ensure that their borrower’s can afford to make the monthly payments on the mortgage, the FHA has set various debt ratio limits that borrowers need to comply with in order to qualify for a loan and take advantage of the historically low FHA mortgage rates. The key debt ratio is the total housing to income ratio, which is calculated by dividing your total housing payments, including your mortgage payment, taxes, and insurance, divided by your gross monthly income. In order to qualify for this loan, the debt ratio must be below 26.32%.

Beyond the housing debt ratio, you will also have to comply with the total debt ratio limit. This test will take your total monthly payments, including housing, auto, credit card, and other loan payments and divide it by your gross monthly income. If your ratio is above 40%, you will not qualify for the lowest possible FHA mortgage rates.

Beyond analyzing your debt ratios, a mortgage lender offering a FHA mortgage will also have to analyze your credit history. A lender will review your credit report to get an understanding of what your likelihood is that you will pay back the loan as agreed. If you have a recent bankruptcy or foreclosure on your report, qualifying for a new FHA mortgage with the lowest possible rates will be difficult. In general, to qualify for the best rates, you will need to have a very good credit history and a score of 740 or higher.

Another key element is that you will need to have equity in your home to qualify for a FHA mortgage, especially if you are using the mortgage for a new home purchase. To qualify for the lowest rates, you will need to have at least a 20% equity contribution. Anything less than that and you will have to pay a higher mortgage rate and will be charged private mortgage insurance each month.