FHA Loan Definition
The Great Depression of the 1930s changed much of the social face of the United States, and it also changed the financial structure of the banking system. For instance, the FHA Loan is a Federal Housing Administration mortgage loan with mortgage insurance to protect lenders when a home may foreclose.
During the Depression when many homes were foreclosed on, the lenders would not have insurance to cover their financial losses. The FHA enables the lenders to have their finances covered in the event that the home forecloses. It does not simply cover all real estate, but allows first time homebuyers to purchase a home with a lower interest rate.
According to the FHA website, in order to put down a ten percent down payment, one would need a FICO score between 500 and 579, and anything above a 580 score would allow the applicant a 3.