What Is the Federal Housing Administration?

FHA loans are mortgages backed by the Federal Housing Administration. FHA loans benefit buyers with limited resources or low credit scores because they allow deposits as low as 3.5% and have a FICO score of 580.

We've made it all easy for you, whether you've already decided that an FHA loan is perfect for you, or you're still not sure what an FHA is. No need to sift through the FHA guide; all your FHA questions can be answered here.

What exactly is an FHA loan?

FHA loans are mortgages backed by the Federal Housing Administration. FHA loans are common for first-time homebuyers with limited funds or credit difficulties. For applicants with a credit rating of 580 or higher, only a 3.5% deposit is required.

The Federal Housing Administration guarantees mortgages granted by banks, non-bank lenders, and credit unions. FHA lenders are willing to offer favorable terms to applicants who may not be eligible for a home loan because insurance will cover the lender in the event of default. FHA-approved lenders can only make one FHA-insured loan.

Single-family homes, 2-4 unit multi-family homes, condos, and some mobile homes are eligible for FHA financing.

What is the Federal Housing Administration?

The Federal Housing Administration (FHA) has been a division of the U.S. Department of Housing and Urban Development since 1965. However, as part of the New Deal, the FHA was established more than 30 years ago.

During the Great Depression, the housing bubble burst and the stock market crashed. By early 1933, nearly half of U.S. homeowners couldn't pay their mortgages.

To prevent foreclosure and make homeownership more accessible, the Federal Housing Administration (FHA) was created. A 20% down payment is the new standard, with guaranteed loans of up to 80% of the home’s value; previously, homeowners could only borrow 50%. 60% of home value.

FHA now insures nearly 8 million households with home loans.

What Makes FHA Loans Different?

The federal government does not guarantee or insure traditional loans, making them more difficult to obtain than FHA loans.

Unlike traditional loans, FHA loans require a lower credit rating and, in some cases, cheaper monthly insurance payments.

Down payment funds from families, employers or charities are more acceptable under FHA guidelines.

Closing costs for FHA loans may be higher than for traditional loans.

What does FHA do?

During the Great Depression of 1934, Congress created the Federal Housing Administration (FHA) to support the housing market. The Federal Housing Administration (FHA) is working to insure home loans from accredited lenders. These loans are aimed at consumers with below-average credit ratings and lack of funds for larger down payments.

FHA Loans: How Do They Work?

All homebuyers must have mortgage insurance. Borrowers who meet certain criteria can receive up to 96.5% of the home's value. When a borrower defaults on a mortgage, the FHA pays the lender.