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It does result in larger monthly payments due to the Up Front Mortgage Insurance Premium (UFMIP), that is rolled into the loan and the monthly Mortgage Insurance Premiums as well. If your credit allows, and is real good, a 5% down Conventional loan, or even a 3% conventional program could result in much lower payments and mortgage insurance that can be canceled after a period of time. FHA mortgage Insurance is non-cancellable and you would have it for the life of the loan.

A Federal Housing Administration Loan (FHA Loan) is a mortgage issued by an FHA approved lender and insured by the Federal Housing Administration. FHA loans are designed to help borrowers with low to moderate income, first-time home buyers, or those that can’t qualify for a conventional loan. They typically require a lower minimum down payment and credit score than conventional mortgages.With an FHA loan, you are currently able to borrow up to 96.5% of a home’s value, which means a down payment of only 3.5% is required. You must have a credit score of at least 580 to qualify. With a credit score between 500 and 579, you can qualify with a down payment of 10%.There are two types of mortgage insurance premiums required with an FHA loan—an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP.As of 2018, the UFMIP charge is equal to 1.75% of the base loan amount. You can pay this at the time of closing, or it can be rolled into the loan. These funds are used to cover mortgage payments in case you default on the loan.Annual MIP payments are made every month. The payments span from 0.45% to 1.05% of the total loan amount, depending on the loan amount, length of the loan, and the original loan-to-value ratio (LTV).

Are closing costs for all FHA loans roughly the same, regardless of the purchase price?No. For the purpose of this answer, my comments apply to FHA forward rather than FHA reverse mortgages.Among the closing costs are the Up Front Mortgage Insurance Premium (UFMIP), the Monthly Mortgage Insurance Premium (MMIP or MIP). Both are based on a percentage. The UFMIP is based on the purchase price and the MIP is based balance of the mortgage and is added to the monthly mortgage payment.The UFMIP is 1.75% of the financed purchase price. This is financed into the transaction so it adds to the financed purchase price and is not required in cash at closing. The MIP is .85% of the monthly payment when the financed Loan to Value (LTV) is above 95% and 80% for an LTV above 95%.The minimum Down Payment for an FHA forward loan is 3.5% which is a great advantage, particularly for one’s first home or starting over. FHA will insure buyers with lower FICO Mortgage Scores than conventional loans.You may find the current maximum FHA loan limits by state and county using this calculator provided by the Department of Housing and Urban Development. Enter the state and county where the property is located to find the current maximum loan amount.