A favorite among first time buyers.

A long-running and popular option for homebuyers, an FHA loan is a loan backed by the Federal Housing Administration (FHA)  that allows for smaller down payments. FHA loans also feature less-stringent qualifying criteria such as flexible income and credit guidelines.

The FHA does require borrower-paid mortgage insurance. The Mortgage Insurance Premium (MIP) can be financed into the loan amount.

Pros:

• You can make a smaller down payment.
• You may be eligible to secure a down payment in the form of a community second mortgage. This second mortgage allows buyers to purchase a home with less of a down payment.
• Credit score and cash reserve requirements are relaxed.

Cons:

• Mortgage insurance is required.
• Property standards must be met—which means it might not be a loan for a fixer-upper.