FHA financing is a type of mortgage loan that is insured by the Federal Housing Administration (FHA), a government agency. The purpose of FHA insurance is to encourage lenders to provide mortgages to borrowers who might not otherwise qualify for a conventional mortgage, due to having a lower credit score, limited down payment funds, and higher debt to income ratios.

FHA loans have a lower down payment requirement of just 3.5% of the purchase price, making them a popular choice among first-time homebuyers who may not have a large down payment saved up. Additionally, FHA loans may have more relaxed credit score requirements, which can be beneficial to borrowers with lower credit scores.

FHA loans come with certain limitations and requirements, such as mortgage insurance premiums (MIPs) that must be paid for the life of the loan. Additionally, FHA loans may have stricter appraisals and have more stringent requirements for the condition of the home. Before choosing an FHA loan, it's a good idea to compare the costs and benefits of FHA financing to those of a conventional mortgage, so you can make an informed decision.

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