Definition
Federal Housing Administration loan program providing mortgage insurance to lenders, enabling lower down payments and flexible credit standards.
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FHA loans allow down payments as low as 3.5% with mortgage insurance. More flexible credit requirements than conventional loans. Designed for first-time and lower-income buyers. Down payment can be gifted. Requires mortgage insurance premium (upfront and annual). Interest rates typically slightly higher than conventional. Maximum loan amounts vary by area. FHA loans represent significant market share of first-time buyer mortgages. Mortgagee approval requires credit scores as low as 580.
Pro Tip
FHA loans are available through approved lenders; shop multiple lenders for best rates.
Example
An FHA loan enabled a first-time buyer to purchase with 3.5% down payment and mortgage insurance.