Which loan type would require the highest monthly payment if the client has a small down payment and other factors are equal?

In this context, the loan type that would typically require the highest monthly payment when a client has a small down payment, and all other factors are equal, is indeed the FHA Loan. FHA Loans are designed to assist borrowers with lower credit scores and smaller down payments, often as low as 3.5%. However, they come with mandatory mortgage insurance premiums (MIP) that add to the monthly payment.

When clients put down a small down payment with an FHA Loan, they not only pay principal and interest on the loan but also the cost of the MIP, which is calculated based on the loan amount and is added to each monthly payment. This often results in a higher monthly payment compared to other loan types that may not have as significant an insurance premium or have alternative structures that leverage down payment size differently.

Conventional loans may have private mortgage insurance (PMI) requirements, but the rates can vary based on the down payment and the borrower's credit profile. On the other hand, VA Loans do not require a down payment at all and have no monthly mortgage insurance fees, while USDA Loans, aimed primarily at rural property buyers, also offer low monthly payments under similar conditions.

Thus, due to the added cost of MIP with FHA