Which type of loan is likely to require mortgage insurance if the down payment is less than 20%?

FHA loans are known for their requirement of mortgage insurance, regardless of the down payment amount. When a borrower puts down less than 20%, the Federal Housing Administration mandates that mortgage insurance is obtained to protect lenders against the risk of default. This insurance is specifically designed to facilitate homeownership for borrowers who may have lower credit scores or smaller savings for a down payment.

In contrast, conventional loans typically require private mortgage insurance (PMI) when the down payment is less than 20%. VA loans do not require any insurance despite low or no down payments, and USDA loans also have specific guarantee fees but do not require mortgage insurance in the traditional sense like FHA loans. Thus, FHA loans are uniquely positioned to necessitate mortgage insurance for lower down payments.