An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD).  FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help credit worthy low-income and moderate-income families who do not meet requirements for conventional loans.

FHA loan programs are particularly beneficial to those buyers with less available cash. When compared to conventional loans the rates on FHA loans comparable, while down payment requirements are lower.

Some of the other benefits of FHA financing:

• Only a 3.5 percent down payment is required.
• Great rates
• Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
• More flexible underwriting criteria than conventional loans
• FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
• Loans are assumable to qualified buyers.
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