Federal Housing Administration
"Also known as an "FHA Loan." The FHA provides mortgage insurance to qualified, FHA-approved lenders. FHA mortgage insurance helps protect lenders from losses associated with mortgage default; if a borrower defaults on a loan, the FHA will pay a specified claim amount to the lender.
When the Federal Housing Administration was established in 1934, it was intended to stimulate the housing industry. By providing insurance to lenders, the idea was that more people would be able to qualify for mortgages, and therefore, purchase a home. FHA loans are generally given to people who otherwise would be unable to qualify for a conventional home mortgage loan. The FHA loan is ideal for a borrower who wishes to purchase a home but does not have enough money for a large down payment. It is also a great loan for a person who wishes to refinance but has a relatively high debt to income ratio.