Federal Housing Administration

What is a Federal Housing Administration Loan (FHA)?

An FHA Loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, FHA Loans require a lower minimum down payments and credit scores than many conventional loans.

As of 2020, you can borrow up to 96.5% of the value of a home with an FHA Loan (meaning you’ll need to make a down payment of only 3.5%). You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA Loan provided you can make a 10% down payment. With FHA Loans, your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance.

All these factors make FHA Loans popular with first-time homebuyers.


Key Points

FHA loans are federally backed mortgages designed for low-to-moderate-income borrowers who may have lower than average credit scores.

  • FHA loansrequire a lower minimum down payments and credit scores than many conventional loans.
  • FHA loansare issued by approved banks and lending institutions, who will evaluate your qualifications for the loan.
  • These loans come with certain restrictions and loan limits not found in conventional mortgages.

It’s important to note that the Federal Housing Administration doesn’t actually lend you money for a mortgage. Instead, you get a loan from an FHA-approved lender, like a bank, and the FHA guarantees the loan.  Some people refer to it as an insured loan, for that reason.