Mortgage rates hovering near 6% have pushed a lot of would-be buyers toward FHA loans, the government-backed option that has long been sold as the friendlier path to a first home.
The pitch sounds simple: lower credit scores allowed, smaller down payment, easier qualifying.
What the brochures tend to skip is the part where the math catches up with you for years after closing.
FHA requires just 3.5% down if your credit score lands at 580 or above, and 10% if you're between 500 and 579.
On a $350,000 house, that's about $12,250 upfront in the good-credit scenario.
Conventional loans can go as low as 3% down, so the FHA advantage here is thinner than most people assume.
The credit score floor is genuinely lower than most conventional programs, which typically want 620 or better.
But a 580 score doesn't unlock a great rate — it unlocks a higher one.
Lenders price in risk, so you may pay more each month than a neighbor with a 720 score on the same street.
Then there's mortgage insurance, the line item that surprises nearly everyone.
FHA loans require an upfront premium of 1.75% of the loan amount, which gets folded into what you borrow.
On top of that, you pay an annual premium, and here's the sting: if you put down less than 10%, that annual charge usually lasts the entire life of the loan.
FHA caps how much you can borrow, and those ceilings vary by county.
In expensive metros the limit is higher, but in much of the country it sits well below what a median home now costs.
If the house you want exceeds the cap, FHA simply isn't an option.
FHA appraisals are stricter than conventional ones, and the home has to meet minimum condition requirements.
Sellers sometimes steer away from FHA offers because of the extra scrutiny, which can matter in a competitive market.
None of this makes FHA loans a bad choice.
For buyers with bruised credit, limited savings, or a desire to keep cash reserves intact, they can be the difference between renting another year and owning.
The mistake is treating them as automatically cheaper.
Run the full monthly number — principal, interest, taxes, insurance, and that mortgage insurance premium — and compare it against a conventional quote before you commit.
FHA borrowers can often negotiate seller concessions up to 6% of the price, which is more generous than conventional rules allow.
That can offset a chunk of the upfront pain.
The honest takeaway: FHA loans are a tool, not a shortcut.
They work best for people who need the flexible credit and down payment rules and who plan to refinance once their score improves.
If you have a 700 score and 10% saved, a conventional loan will usually cost you less over time.
Final Thoughts
Ask a lender to show both side by side in writing, then decide with actual numbers instead of a slogan.