The Federal Housing Administration (FHA) does not make the loans; it provides mortgage insurance which protects the lender. Although FHA loans have statutory limits, the qualifications are generally more liberal than those for conventional loans. They have lower down payment requirements (3.5% down), lower monthly insurance premiums, and often, lower closing costs which can also be financed.

FHA loans are intended to aid eligible families with low-to-moderate incomes who do not qualify for conventional loans.