Federal Housing Administration (FHA) LoansFHA loans cover things like mortgage insurance, lending limits, debt-to-income ratios, credit issues, and closing costs. FHA Loans for Low to Moderate IncomesIn 1934, Congress created the Federal Housing Administration during the Great Depression. At the time home foreclosures had skyrocketed and mortgage terms were difficult to meet. To assist the U.S. housing market, the government created a federally insured loan program to reduce lender risk and made it easier for borrowers to qualify for a home loan. An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans. –InvestopediaCurrently, you can borrow up to 96.5% of the value of a home with an FHA loan, with only a 3.5% down payment. In order to qualify, you’ll need a credit score of 580. You can qualify for an FHA loan if your credit score falls between 500 and 579 with a 10% down payment. FHA loans allow people to make down payments from savings, a financial gift from a relative, or a down payment assistance grant. FHA loans are popular with first time homebuyers. It is noteworthy that while FHA loans require a lower credit score and down payment for approval, they do involve other rigorous parameters.