Legal Definitions - FHA mortgage

An FHA mortgage is a type of mortgage that is fully or partially insured by the Federal Housing Administration. This means that if the borrower defaults on the loan, the FHA will pay the lender a portion of the outstanding balance. FHA mortgages are often used by first-time homebuyers or those with lower credit scores, as they typically have lower down payment requirements and more lenient credit score requirements than conventional mortgages.

For example, if a borrower takes out an FHA mortgage for $200,000 and defaults on the loan when the outstanding balance is $150,000, the FHA will pay the lender $75,000 (assuming the FHA insurance covers 50% of the outstanding balance).