FHA loans are backed by the Federal Housing Administration, an agency under the jurisdiction of the Department of Housing and Urban Development. FHA loans are insured by the FHA, which simply means that this organization protects your lender against loss if you default on your loan.
FHA loans are available with low down payment options and lower minimum credit score limits, but you’ll also have to pay mortgage insurance.
The option of a low down payment and more lenient credit requirements can make FHA loans particularly attractive for first-time home buyers, although you don’t have to be a first-time home buyer in order to qualify. Here are some benefits of FHA loans:
- Credit score requirements are lower compared to other loans.
- Your lender can accept a lower down payment.
- You could still qualify for an FHA loan if you have a bankruptcy or other financial issues in your history.
- FHA Closing costs can often be rolled into your loan.