An FHA loan is a government-backed loan offered by FHA-approved lenders. The FHA (Federal Housing Administration) guarantees the loans for approved lenders. If an FHA borrower defaults on their loan and goes into foreclosure, the FHA promises to pay the lender back a portion of what they lost.
Because of the government guarantee, FHA loans have flexible underwriting guidelines making it an easier loan to get, especially if you have bad credit or little money to put down on the home. FHA loans are great for borrowers with less-than-perfect credit, little money to put down, or borrowers with higher existing debts.
FHA loans’ lenient guidelines are attractive for both first-time homebuyers and subsequent homebuyers looking for a second chance. FHA loans offer:
Despite its name, the FHA has nothing to do with the loans' underwriting and funding. They leave that to the FHA-approved lenders. Instead, the FHA insures the loans, and they have insured over 47 million FHA loans since they began the program in 1934.Purchase Qualifier Refinance Rate Checker