The FHA is an agency of the federal government. The FHA works with mortgage lenders throughout the country to help many homebuyers secure the financing that they need in order to have the house of their dreams. One of the basic functions of the FHA is to insure mortgage loans made to individuals. FHA insurance often times makes lenders more willing to work with an individual who does not completely fit their credit standards.
Lenders can also receive similar mortgage insurance from private companies.
But what makes FHA insurance more attractive than many other privately issued insurances is that borrowers are usually given more flexibility. Down payment requirements through FHA are often times lower as well. Another option is that FHA allows for the Family Money Rule. This rule states that the money used for both down payment and closing costs may come from a family member. FHA insured loans are also assumable loans.