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  1. An FHA loan is a mortgage insured by the Federal Housing Administration.
  2. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
  3. FHA borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member or a grant from a state or local government down payment assistance program.
  4. The maximum loan amount available on a specific property is based on the purchase price or the FHA-appraised value, whichever is less.
  5. The borrower must provide 3percent of sales price to be used toward down payment & closing cost; the seller is allowed to contribute up to 6percent of sales price towards discount points, prepaids and other allowable closing cost.

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