FHA

FHA loans are government-backed loans insured by the Federal Housing Administration. These are low-down payment option loans available for primary residences and are available to all borrowers (not limited to first-time homebuyers). The program requires as little as 3.5% down on a purchase but requires an upfront mortgage insurance premium (MIP) that can be rolled into the loan amount, as well as, as monthly private mortgage insurance (PMI). Because is insured, the program has very competitive rates.

FHA loans have more flexibility than conventional loans by allowing higher debt-to-income ratios and lower credit score requirements for qualification. FHA guidelines have options to work with borrowers that have a history of financial issues, including bankruptcy, to allow consumers to maintain housing stability. 

While FHA is more lenient than conventional mortgages, the loans require the borrower to carry private mortgage insurance for the life of the loan if the down payment was less than 10%. FHA also has a reduced maximum loan limit by county compared to conventional mortgages. Current limits are available at HUD FHA Mortgage Limits.