What is an FHA loan and who does it benefit?

A Federal Housing Administration, or FHA, loan is a government-insured mortgage designed for borrowers with lower credit scores and smaller down payments. FHA loans require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or higher, and 10 percent for scores between 500 and 579. Borrowers pay an upfront mortgage insurance premium plus an annual premium for the life of the loan in most cases. FHA loans are popular with first-time homebuyers because of the lower qualification requirements.