How FHA loans make owning a home more accessible to some buyers

FHA loans can make homeownership more accessible for buyers with limited savings or less-than-perfect credit. These government-backed mortgages reduces lenders' risk by providing federal insurance on qualifying loans for borrowers who may not otherwise qualify.

While FHA loans can help secure home financing with a lower down payment and reduced credit requirements than conventional mortgages, they also include mortgage insurance costs and other restrictions buyers should understand. Learning what an FHA loan is and how it works can help you determine whether this type of financing fits your homebuying goals.

An FHA loan is a mortgage that's insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). Because the FHA insures the loan against losses when borrowers fail to pay, lenders can be more flexible regarding credit and down payment requirements than they might otherwise be.

"FHA loans give people with a 580 credit score an opportunity to only put 3.5% down. It is one of the most accessible loan products,” explains Ashley Harris, Director of Homebuyer Education at Neighbors Bank.

The federal government doesn't directly lend the money for FHA loans. Homebuyers still apply to private lenders, such as banks…

Original source: https://www.usatoday.com/money/