A FHA loan is a mortgage insured by the Federal Housing Administration, an agency of the U.S. Department of Housing and Urban Development.
Widely considered to be for first time home buyers, the loan program is actually available to most people as long as they meet FHA requirements. Some requirements include things such as they must make the property their primary residence, the property must be FHA-approved, and the buyer must have a steady employment history for the past 2 years. The program allows for a higher debt to income ratio, allows for a co-signer, and allows gift funds for a down payment. It’s also very forgiving of buyers with low credit scores; with a score of 580, one can put down as little as 3.5%. However, interest rates aren’t as attractive as for Conventional loans and FHA loans require mortgage insurance.