FHA loans, which are federally insured by the Federal Housing Administration, require a down payment as low as 3.5 percent and tend to have looser guidelines. These loans may be a good option for borrowers with less cash and a lower credit score. Of course, lenders may have their own standards that require a higher credit score. FHA loans require upfront mortgage insurance and annual mortgage insurance (PMI) that you generally pay monthly over the course of the term. FHA loans are sometimes a good option, but not very popular with sellers, as they have additional requirements like an FHA appraisal and inspection to verify the condition of the home. Sometimes the FHA will make additional demands on the seller to improve the property – exterior paint and roofs are often the issue. Buyers should consider a low down payment conventional loan in comparison and see which one is a better fit.