If you’re not sure you can afford a typical down payment for a conventional home mortgage, you may want to consider an FHA loan. Loans through FHA generally involve a lower down payment as compared to conventional loans; however, the loan amount may have limitations.
How does an FHA loan work?
The FHA does not technically extend the money to the borrower; rather borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Created as part of the US National Housing Act of 1943, the FHA loan was designed to help stabilize the nation’s home financing system. FHA guidelines are generally not as strict as government-sponsored enterprises like Fannie Mae and Freddie Mac.