How screwed am I by not putting down 20% on a home purchase?

Full disclosure: I know practically NOTHING about the homebuying process. My adult life to this point I've just rented and have only just now begun looking at purchasing my first place, most likely a condo/townhome simply due to price.

I'd been dreading finding a way to come up with 20% but then saw FHA loans which require as little as 3.5. After some very casual research I see the benefit of the 20% is you avoid PMI, which is great. My situation though is that I'm kind of in between the 2 extremes. I can't put down 20%, that's pretty much certain. However, I would really prefer to put down 10% or above. I also have very good credit so not worried about getting approved.

If I do go the FHA route, would I be better suited just putting down a minimum and saving the cash, or should I try to put down as much as I'm comfortable with? With this being a first purchase, I'm probably not going to stay longer than 5ish years or so, if that makes a difference.

I also have a trusted mortgage lender that I will work with, but it was suggested to wait a few months before really getting started since it won't be til early January that I'll be move-in ready.


I guess what I'm basically asking is...in a ELI5 type of way can you tell me: 1) Should I just put down the minimum payment and keep more cash, 2) put down the max amount I possibly can [and the benefits of doing so], 3) Is there some alternate method I can do to avoid the FHA loan route (it seems that doing this is good for low credit/low income folks but has drawbacks in the long term) but still avoid putting down 20%