An FHA loan is a mortgage insured by the Federal Housing Administration. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA loans are popular among first-time home buyers who have little savings or credit challenges.
The FHA insures mortgages issued by lenders. That insurance protects lenders in case of default, which is why FHA lenders are willing to offer favorable terms to borrowers who might not otherwise qualify for a home loan.
An FHA loan can be used to buy or refinance single-family houses, two-to four-unit multifamily homes, condos, and certain manufactured homes.