An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for borrowers who are unable to make, or are uninterested in making, a large down payment. FHA loans allow the borrower to borrow up to 96.5% of the value of the home. The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers.
In addition to traditional first mortgages, the Federal Housing Administration offers a reverse mortgage program known as a Home Equity Conversion Mortgage (HECM), which helps seniors convert the equity in their homes to cash while retaining the titles to their homes.