FHA home loans are a popular choice for first-time buyers and have been a long-standing favorite in the housing market. Backed by the Federal Housing Administration (FHA), these loans are designed to facilitate homeownership by allowing for smaller down payments and offering more lenient qualifying criteria, such as flexible income and credit requirements. One notable feature of FHA loans is that the Mortgage Insurance Premium (MIP), which is required, can be financed into the loan amount.

There are several advantages to FHA loans. They require a smaller down payment compared to conventional loans and may even allow for the use of a community second mortgage to further reduce the initial payment. Additionally, credit score and cash reserve requirements are more relaxed, potentially enabling borrowers to secure a lower interest rate. However, FHA loans do come with some drawbacks, such as mandatory mortgage insurance and strict property standards that may not suit buyers interested in purchasing homes needing significant repairs.