An FHA loan refers to a mortgage loan that is insured by the Federal Housing Administration (FHA), which is a division of the U.S. Department of Housing and Urban Development (HUD).

An FHA loan refers to a mortgage loan that is insured by the Federal Housing Administration (FHA), which is a division of the U.S. Department of Housing and Urban Development (HUD). The FHA doesn't actually provide the loan, but it offers insurance to lenders, mitigating their risk in case the borrower defaults on the loan.

FHA loans are designed to make homeownership more accessible, particularly for first-time homebuyers or individuals with lower credit scores or limited down payment funds. These loans have specific requirements and features that differentiate them from conventional mortgages:

1. Down payment: FHA loans typically require a lower down payment compared to conventional loans. The minimum down payment requirement is generally 3.5% of the purchase price.

2. Mortgage insurance: Borrowers are required to pay both an upfront mortgage insurance premium (MIP) at closing and an annual MIP as part of their monthly mortgage payment. This insurance protects the lender in case of default.

3. Credit score: FHA loans are more lenient when it comes to credit requirements, allowing borrowers with lower credit scores to qualify. However, specific lenders may have their own credit score requirements. Some FHA programs go as low as a 580 credit score.

4. Loan limits: The FHA sets loan limits for different areas, which establish the maximum loan amount that can be insured. These limits vary based on location and property type.

5. Property requirements: FHA loans have certain property standards to ensure the safety and livability of the home. For example, the property must meet minimum health and safety standards established by the FHA.

It's important to note that FHA loans are available for both purchasing a home and refinancing an existing mortgage. However, it's advisable to research and compare loan options from various lenders to determine the best fit for your specific needs and financial situation.