Less-rigorous lending standards and lower down payment requirements make FHA loans popular with mortgage borrowers.
An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
Because of that insurance, lenders can—and do—offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements. The FHA is an agency within the U.S. Department of Housing and Urban Development (HUD).
Click here for a great article from RIS Media with seven facts that borrowers should know about FHA loans.