Also written as:
FHA
A government-backed mortgage insured by the Federal Housing Administration. Designed for buyers with lower credit scores or smaller down payments (as low as 3.5%).
An FHA loan is a mortgage backed by the federal government through the Federal Housing Administration. The FHA doesn't make the loan itself — they insure it, which lets lenders offer better terms to buyers who might not qualify for conventional financing.
The big appeals: down payments as low as 3.5%, more flexible credit score requirements (typically 580+, sometimes lower), and easier debt-to-income ratios. The trade-off is mortgage insurance: FHA loans require an upfront premium AND a monthly mortgage insurance premium (MIP) for most of the life of the loan.
FHA loans are a popular path for first-time buyers, buyers with limited savings, and buyers rebuilding credit after a setback. They have loan limits that vary by county.
Example
A buyer with a 620 credit score and $18,000 saved could buy a $500,000 home with 3.5% down ($17,500) using an FHA loan. They'd pay a 1.75% upfront mortgage insurance premium ($8,443 added to the loan) plus 0.55% annual MIP (~$220/month).
Also known as
FHA mortgage, Federal Housing Administration loan
Source:
HUD