FHA Loan Pros and Cons

FHA home loans can be advantageous for some borrowers, because of their flexible guidelines for accepting lower credit scores, higher debt ratios, and the amount of cash out allowed. The disadvantage is FHA home loans require a mortgage insurance premium of 1.75%, which is usually deducted from the loan amount on a refinance. There is also a monthly mortgage insurance premium of .5% added onto the monthly payment. This is similar to paying mortgage insurance on conventional home loans over 80% loan to value.