Borrowers initially flocked to FHA loans thanks to their low down payment requirements – as little as 3.5% in some cases – and their accessibility for people with low credit scores. But hikes in FHA premiums in recent years have made them less popular.Homebuyers who don’t put 20% down will likely have to pay mortgage insurance on top of the interest and principal. An FHA loan might be a better deal than a conventional mortgage, but frequently it’s not. There are two types of mortgage insurance, and both are triggered when a buyer doesn’t put 20% down. With conventional loans, the bank requires you take out private mortgage insurance. The premium goes to a private company that reimburses the bank if you default. With an FHA loan, you pay mortgage insurance premiums to a government entity that protects lenders from defaulting borrowers. The FHA also reversed its policy of canceling mortgage insurance premiums once the loan-to-value ratio dropped to 78%. It forced borrowers who put at least 10% down to pay mortgage insurance for at least the first 11 years of the loan. Putting less down meant paying the premium for the loan’s duration. These changes made conventional mortgages with private mortgage insurance a better deal in many cases. The average PMI payment is between 0.3 and 1.15% each year with no upfront cost. And you can usually cancel the policy once you have 22% equity in the house. FHAs are easier to qualify for and are many times the only option for borrowers with lower incomes. But it’s worth exploring your options before taking one out.