FHA Loans: The Pros and Cons

Written By: Nathan Gillin

When it comes to government insured or guaranteed loans versus conventional loans, FHA loans are one of the more popular choices for home buyers.

FHA loans are those insured by the Federal Housing Administration. They are one of the three major government sponsored loans.


  • Easy credit requirements (>580)
  • Low closing costs
  • Possible to qualify even with other debts 
    • Debt-to-Income ratio can be as large as 43%
    • No minimum income requirement
  • Can use on condos and multi-unit properties as well as single family homes
  • If you later decide to sell your home, the new buyer can take over the mortgage payment


  • Private mortgage insurance is hefty:
    • 1.75% PMI upfront
    • 0.85% annual premium, usually for the entire lifetime of the mortgage
    • Required for all down payments under 20%
  • There are limits on how much you can borrow
  • Somewhat higher down payment necessary (typically higher than conventional loans)
  • Restrictive housing standards (not advised for “fixer-upper” homes)