What is an FHA Home Loan?

The FHA mortgage program was created to make home ownership accessible to more people, and is administered by the US Department of Housing and Urban Development (HUD). FHA does not actually lend money; it reimburses FHA lenders when borrowers default on FHA home loans. This reduces the lenders’ risk, which makes them more willing to loan money, and keeps borrowers’ costs down. FHA mortgage lenders offer a variety of home loans designed to meet many needs, including:

  • Mortgages to purchase single-family homes, condominiums and 1- to 4-unit multifamily homes (203(b) loans)
  • Mortgages for manufactured or mobile homes (with or without land)
  • Mortgages to rehabilitate or improve a home that you already own, or one that you plan to buy (203(k) mortgages)

Evaluating an FHA Refinance

FHA mortgages are especially well-suited to meet the needs of borrowers who need to finance more than 80 percent of their home’s purchase price or appraised value. They carry advantages and drawbacks that you should be aware of before you decide that an FHA mortgage is right for you.

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  • This kind of loan is helpful for applicants who don’t have a 20% down payment saved.
  • These loans can also help applicants who need more flexible income or credit requirements. Be aware that minimum credit scores apply so not all applicants will qualify.


  • There’s a maximum loan amount, which can vary depending on where the home is located.
  • FHA loan programs typically require you to pay both an upfront mortgage insurance premium (UFMIP) and a monthly mortgage insurance premium (MIP). You’ll need to factor these premiums in when you set your budget.
  • There tends to be a more complex approval process for an FHA loan, and often times more paperwork to fill out.
  • An FHA loan may help get you into a home, but it’s important to be sure the total monthly payment that comes along with the loan is one you can comfortably afford.