FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development. FHA loans are an attractive option, especially for first-time homeowners:
- Generally easier to qualify for than conventional loans.
- Lower down payment requirements.
- Lower closing costs than conventional loans.
However, FHA loans are not always going to be the best option for you. There are a few downsides to going with an FHA loan, such as:
- Unless you put 10% down, you can NEVER get rid of monthly mortgage insurance except through a refinance.
- For people with good-to-excellent credit, the monthly mortgage insurance is much higher than what it will be with a conventional loan.
- The loan limits are lower than conventional loans.
- There is an upfront mortgage insurance premium (can be rolled into the loan, but it is still a cost) in addition to the monthly mortgage insurance premium.
Learn more about FHA loans. (Department of Housing and Urban Development)