What is an FHA Loan?
FHA stands for the Federal Housing Administration. The FHA was created to help increase home-ownership in the United States by encouraging lenders to lend to more people who were traditionally considered higher risk borrowers. FHA encourages lenders to do this by requiring a mortgage insurance premium on nearly every loan. FHA then takes those premiums and pools them together. If a borrower defaults, the pool pays out to the lender to help cover any losses. Its a win-win situation for everyone! The lender is protected, good borrowers who were previously boxed out of loans have easier times qualifying, and home ownership rates in the country have an opportunity to improve.