- Allow for down payments as low as 3.5 percent.
- Allow lower credit scores than most conventional loans.
- Have a maximum loan amount that varies by county. Learn your FHA loan limit.
For borrowers with good credit and a medium (10-15 percent) down payment, FHA loans tend to be more expensive than conventional loans. For borrowers with lower credit scores or a smaller down payment, FHA loans can often be the cheapest option. But there are no hard-and-fast rules—a lot depends on the current market. If you’re not sure, ask lenders for quotes for both options and compare total costs to see which offers the best overall deal.
Required for all FHA loans.
More on mortgage insurance.
Mortgage insurance: what you need to know
Mortgage insurance helps you get a loan you wouldn’t otherwise be able to. If you can’t afford a 20 percent down payment, you will likely have to pay for mortgage insurance. You may choose to get a conventional loan with private mortgage insurance (PMI), or an FHA, VA, or USDA loan.
Mortgage insurance usually adds to your costs. Depending on the loan type, you will pay monthly mortgage insurance premiums, an upfront mortgage insurance fee, or both.
Mortgage insurance protects the lender if you fall behind on your payments. It does not protect you. Your credit score will suffer and you may face foreclosure if you don’t pay your mortgage on time.