Definition
FHA 203(b) is the standard FHA loan for primary residences. You can put down as little as 3.5% with a credit score as low as 580. FHA insurance protects the lender, allowing them to accept borrowers banks would decline. It's hugely popular with first-time buyers.
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FHA 203(b) is the most common FHA program, requiring as little as 3.5% down payment and accepting credit scores as low as 580. The government insures the loan, protecting lenders from losses, which allows them to take on borrowers with credit challenges or limited assets. FHA loans require mortgage insurance premiums (both upfront and annual), which increase the total cost. FHA loans are assumable, allowing future buyers to take over the existing loan. The program is popular with first-time homebuyers who don't have substantial down payment savings.
Pro Tip
FHA loans allow gifts for down payments and have flexible employment verification; utilize these features if you're self-employed or have irregular income.
Example
A first-time buyer with a 600 credit score and $15,000 saved buys a $250,000 home with a 3.5% down payment ($8,750) and FHA insurance covering the risk.