An FHA loan is a mortgage insured by the Federal Housing Administration, designed to open the door for buyers with smaller savings or thinner credit. Because the government insurance protects the lender if you default, lenders can accept as little as 3.5% down and more forgiving credit scores than a typical conventional loan requires.
The trade-off is the mortgage insurance premium (MIP): an upfront charge plus an annual premium baked into your monthly payment. Unlike private mortgage insurance on a conventional loan — which drops off once you build enough equity — FHA's annual premium usually sticks around for the life of the loan unless you put down at least 10% or eventually refinance.
Who it fits: first-time buyers, anyone rebuilding credit, or buyers who'd rather keep cash in reserve. Who should compare carefully: strong-credit borrowers with a solid down payment, who often come out ahead with a conventional loan.
Run the numbers both ways, and see the full breakdown in FHA vs. conventional.