The Federal Housing Administration (FHA) is the U.S. government agency that insures residential mortgages.
Created in 1934 during the Great Depression, the FHA is part of the U.S. Department of Housing and Urban Development. It does not usually lend money directly to home buyers. Instead, it insures approved lenders against losses if a borrower defaults, allowing lenders to offer FHA-insured loans with relatively low down payments and more flexible qualification rules than many conventional mortgages.
FHA insurance is especially associated with first-time buyers, although borrowers do not have to be purchasing their first home. Mortgage insurance premiums normally help fund the program, and FHA loans have specific limits and occupancy requirements. The agency’s role is often confused with Fannie Mae and Freddie Mac, which buy and guarantee mortgages in the secondary market, while the Department of Veterans Affairs generally guarantees—not directly insures in the FHA manner—eligible veterans’ loans.