Pros of FHA: small down payment, amazing credit is not crucial.
Cons: monthly mortgage insurance is required...could add an additional 200-300 bucks a month to your mortgage.
Web Reference: http://fhamortgageinfo.com/
insurance remains thoughout the life of the loan. If you have 20% or more down and closing costs
(the seller may also agree to pay these about 2%) PMI will not be required. You have to weigh the
additional monies down versus the monthly PMI payment. How long you will remain in the property
is the deciding factor.
FHA loans are designed for those with less-than-perfect credit. FHA loans have a low down payment requirement which is particularly attractive. The interest rate is competitive, and FHA allows the seller to pay some of the borrower's closing costs.
You will pay mortgage insurance on an FHA loan, but you will likely pay mortgage insurance on any loan you obtain unless you're making a down payment of 20%, or more.
As a side benefit, an FHA loan is assumable by the future buyer of your home.
There are more pros, than cons when it comes to an FHA loan.
1. Low down payment.
2. The loan is assumable when you sell.
If and when interest rates head higher, the second point will be important.
But it really depends on your particular situation. As an example, VA loans are most likely better deals for disable vets.