What Is an FHA Mortgage Loan?

An FHA Loan is a mortgage loan insured by the Federal Housing Administration (FHA). The FHA does not provide the loan; rather, it insures the loan for the lender. If the borrower defaults, the lender can seek recourse from the FHA. This lowers the lender's risk and makes them more likely to issue a loan.

The FHA was formed in 1934, and joined the Department of Housing and Urban Development in 1965. The organization has insured more than 33 million home mortgages since its inception. Today it continues to help low- and middle-income families move into their dream homes, by making it easier to obtain mortgages. More than 800,000 current homeowners have mortgages insured by the FHA.

One of the benefits of an FHA-insured loan is low mortgage rates. For single-family homes, down payments can be as low as 3 percent, making it possible to afford a higher-priced home than with a more conventional 10 or 15 percent mortgage. The FHA can also help home buyers finance their closing costs, and even offers mortgage insurance.