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.
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