An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). These loans are designed to help borrowers who may have lower credit scores, smaller down payments, or limited financial resources to qualify for a mortgage.

Here are some key features of FHA loans:

1.  Lower Down Payment: FHA loans typically require a down payment as low as 3.5% of the home’s purchase price, making it easier for first-time homebuyers to get into the market.
2.  Flexible Credit Requirements: Borrowers with credit scores as low as 580 can qualify for an FHA loan with the minimum down payment. Those with credit scores between 500 and 579 may still qualify, but they will need to make a down payment of at least 10%.
3.  Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (MIP) and a monthly MIP, which protects the lender in case the borrower defaults on the loan. This insurance makes it possible for lenders to offer these more accessible loan terms.
4.  More Lenient Debt-to-Income Ratios: FHA loans allow for higher debt-to-income ratios than many conventional loans, which means borrowers can have a higher percentage of their income going towards debt payments and still qualify for a mortgage.
5.  Assumable: FHA loans are assumable, meaning that when the home is sold, the buyer can take over the seller’s existing FHA loan, potentially at a lower interest rate.

Overall, FHA loans are particularly attractive to first-time homebuyers, people with less-than-perfect credit, and those who may not have a large amount of money saved for a down payment.