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FHA=Federal Housing Assistance--loan that is through the government to assist first time buyers. Easy to qualify for, but you have to pay PMI unless you have 20% down.
PMI=Private Mortgage Insurance--basically an insurance policy that the lender will require you to take out on the home to insure them if you default on the loan. My PMI amounted to about $150 per month on a $150k mortgage. The problem with PMI is that you get nothing out of it, it just goes into a hole. If you get an 80/15/5 loan the interest on the 15% second mortgage is at least tax deductible and you gain some equity as well.
To me so far, the 80/15/5 looks like a good option. Basically you have a primary mortgage for 80% of the price of the home (avoiding the PMI), then you take out a second mortgage on the home for 15% of the value and you pay 5% down. From what I understand the interest rate on the 15% second mortgage is a little higher than your primary mortgage, but it still beats paying PMI in my opinion.
If our house sells for what the realtor wants to list it for, we COULD pay 20% down if we put everything from the sale of our existing house down on the new house. But, my opinion on the topic is that the price of your house will appreciate independent of how much equity you have in the house. Therefore, it makes sense to place as little into your house as possible and put the rest into an investment that WILL grow based on how much you have invested, like a mutual fund. That's the plan anyhow, I'll let you know how it works out in 20 years...
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Rick
1984 911 coupe
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