An FHA loan is secured by the Federal Housing Administration, a federal organization that is a part of the U.S. Department of Housing and Urban Development (HUD). None of the funds are provided by the FHA; what the FHA does is make sure that the mortgage is paid for in case the borrower defaults on his or her loan obligations. The FHA and their loan programs are created to help low-to-moderate income purchasers help meet credit requirements if they otherwise would not.
Down payments are often lower with an FHA loan despite using conventional market rates. Those with lower income or less starting money to use as a down-payment on a loan benefit the most from FHA loan programs.
