What type of mortgage is insured by the Federal Housing Administration (FHA)?

A mortgage that is insured by the Federal Housing Administration is specifically referred to as an FHA mortgage. The primary function of the FHA is to provide mortgage insurance on loans made by approved lenders to borrowers with low to moderate incomes. This insurance protects lenders from losses due to borrower defaults, which encourages them to offer loans to individuals who might not qualify for conventional financing.

FHA mortgages are designed to make homeownership more accessible, particularly for first-time homebuyers, by allowing lower down payments and more flexible credit requirements compared to conventional loans. They also adhere to specific guidelines laid out by the FHA, which include limits on the mortgage amount based on the property's location.

Understanding the nature of FHA mortgages is crucial for real estate professionals, as they offer significant benefits to both borrowers and lenders, thus playing a vital role in the housing market.