FHA loans

FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA), a government agency. The FHA doesn’t lend the money directly–private lenders do. FHA loans:

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.

Mortgage insurance

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.

Learn more about mortgage insurance.

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