FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA) , a government agency. The FHA doesn’t lend the money directly–private lenders do.
FHA loans allow for down payments as low as 3.5 percent; allow lower credit scores than most conventional loans; and ave a maximum loan amount that varies by county.
For borrowers with good credit and a medium (10-15 percent) down payment, FHA loans tend to be more expensive than conventional loans. For borrowers with lower credit scores or a smaller down payment, FHA loans can often be the cheapest option.