For homeowners and those planning to buy a home, it's important to know the rules and limits of Federal Housing Administration loans and consider them along with other home financing options.

Your down payment for an FHA loan can be minimal

The minimum down payment required by FHA loan rules is 3.5 percent, which means if you're buying a $300,000 home, you only need $10,500 to put down (not including any fees or closing costs). For many conventional mortgages, you'd need to provide at least 20 percent down.

You can get an FHA loan with bad credit

If you have insufficient or "bad" credit with a credit score between 500 and 579, you can still qualify for an FHA loan — you'll just need to put at least 10 percent down instead of the 3.5 percent required for scores of 580 and up. Check with your lender to see if you meet all other requirements.

You can use your loan to help cover repairs

FHA loans have an optional add-on loan product that allows you to borrow up to $35,000 to pay for home repairs and improvements like replacing carpet or paint, remodeling or correcting nonstructural home damage. Even better, the amount of the loan is based on the projected home value after the fixes are made.

Mortgage insurance is mandatory on FHA loans

Because the buyer pays in a smaller portion of the home's value, lenders are taking a bigger risk by financing FHA loans. This means you'll have to pay for private mortgage insurance including the upfront premium, which is currently at 1.75 percent, plus the annual premium. But don't worry: Mortgage insurance is tax deductible through 2015.

It's easier to refinance an FHA mortgage

Once your loan amount is 80 percent or less than the value of your home, you might be able to refinance and reduce or even eliminate your mortgage insurance and save as much as several hundred dollars per month.

Tess Frame,