What are FHA loans?

These mortgages, insured by the Federal Housing Administration (FHA), are tailored to help first-time homebuyers and individuals with limited incomes who may not qualify for conventional mortgages. Compared to conventional loans, FHA loans require a lower down payment (starting at just 3.5%), allow for a higher debt-to-income ratio, and have more lenient income and credit requirements. Though lower interest rates are featured, it’s important to note that FHA loans require mortgage insurance, which increases the overall cost of the loan. An FHA loan could be a suitable option for you if you are looking to buy a home but do not have substantial savings for a down payment.