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Pros of government-insured loans
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They help you finance a home when you don’t qualify for a conventional loan.
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Credit requirements are more relaxed.
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You don’t need a large down payment.
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They’re open to repeat and first-time buyers.
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Expect to pay mandatory mortgage insurance premiums that might not be able to be canceled
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You’ll have higher overall borrowing costs.
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Expect to provide more documentation, depending on the loan type, to prove eligibility.
Cons of government-insured loans
FHA
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Borrowers need a minimum FICO score of 580 to get FHA’s maximum 3.5 percent financing.
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OR a credit score of 500 is accepted with at least 10 percent down
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FHA loans require a Mortgage Insurance Premium (MIP)
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Allowing of 100% of down payment to be gift funds.
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Must make monthly payments
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Must be a member of the U.S. military (active duty and veterans)
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Do not require a down payment or PMI
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A funding fee is charged on VA loans as a percentage of the loan amount to help offset the program’s cost to taxpayers. This fee and other closing costs can be rolled into most VA loans or paid upfront at closing.
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A credit score of at least 620
VA
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USDA loans help moderate- to low-income borrowers buy homes in rural areas.
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Will only fund owner-occupied primary residences.
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You must purchase a home in a USDA-eligible area and meet certain income limits to qualify.
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Some USDA loans do not require a down payment for eligible borrowers with low incomes.