What does an FHA loan help with?

An FHA loan, or Federal Housing Administration loan, is specifically designed to assist low-to-moderate-income buyers in obtaining affordable housing. The FHA provides insurance on loans made by approved lenders, which lowers the risk for lenders and opens the door for more individuals and families to secure financing. This type of loan is particularly beneficial for those who may not have substantial savings for a large down payment or those who have lower credit scores, as it allows for lower down payments—often as low as 3.5% of the purchase price—and more flexible credit requirements.

Investors looking to purchase rental properties typically have different financing options that cater more specifically to investment properties rather than owner-occupied homes, which are what FHA loans target. Additionally, FHA loans are not exclusively for high-income buyers; in fact, they are aimed at helping those who may not fit into that category. Short-term loans for auction purchases involve different structures and terms, which are outside the scope of what FHA loans provide.