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Borrowers need cash for closing costs in addition to their down payment and cash reserves.

“The closing costs are about the same for both types of mortgages, but the difference in loan costs comes in with the amount of the down payment/mortgage insurance required by the borrower,” Mr. Toler said. “This can vary widely.”

For FHA loans, an upfront mortgage insurance payment of 1.75 percent of the loan amount is required for all borrowers. This premium can be wrapped into the loan itself. In addition, borrowers must pay annual mortgage insurance as part of their monthly mortgage payments. Mr. Busch said those payments must be made for at least five years, even if the homeowner’s loan-to-value is less than 80 percent.

“Private mortgage insurance is more flexible,” Mr. Cunningham said. “You can pay the premiums upfront with your closing costs, have your lender pay the premiums while you pay a slightly higher interest rate or pay them monthly. You can eliminate PMI faster than FHA mortgage insurance, too.”

PMI premiums vary according to your credit score, your loan-to-value and even your home’s location. Mr. Cunningham said PMI premiums usually are less expensive than FHA mortgage insurance premiums. A lender can compare these two loan programs based on individual circumstances to see which mortgage will generate lower monthly mortgage payments.

Borrowers who cannot qualify on their own for a mortgage may want to ask someone to co-sign on their home loan.

“FHA rules allow a non-occupying co-signer, such as a parent or grandparent, to be on the loan,” Mr. Toler said. “Conventional loans do not allow anyone to co-sign a mortgage unless that person is living in the home.”

The maximum allowable loan for conventional financing is $625,500, but Mr. Busch said borrowers must make a down payment of at least 10 percent to be approved for a conventional loan of more than $417,000.

FHA loan limits vary by housing market and are capped at $729,500 in the Washington metropolitan area. Buyers can borrow up to that limit with a down payment of just 3.5 percent in this housing market, so high-income borrowers with less cash may want to consider the benefits of an FHA mortgage.

Refinancing homeowners generally prefer conventional mortgages so they can avoid paying FHA mortgage insurance premiums, Mr. Busch said. However, conventional lenders generally require home equity of at least 5 percent to 10 percent in order to refinance, while FHA refinancing is possible with as little as 2.5 percent in equity.

Mortgage lenders typically use automated underwriting systems, so borrowers can try to qualify first for a conventional loan and then can consider FHA financing if they are rejected for a conventional loan. If, however, you know your credit score is less than 680 or 700, you have limited cash resources for down payment and reserves, and your debt-to-income ratio is high, an FHA loan may be a better fit in spite of the requirement to pay higher mortgage insurance premiums.