The Federal Housing Administration (FHA) insures mortgages, making it easier for families, whom would normally be excluded, to purchase a home. FHA especially helps make buying a home during a recession easier for people. It also has programs to finance military housing and homes for veterans.

The Federal Housing Administration (FHA) was established in 1934 to improve housing standards and conditions and to provide an adequate home financing system through insurance of mortgages. Families that would otherwise be excluded from the housing market were finally able to buy the homes of their dreams.

During the 1940s, FHA programs helped to finance military housing and then homes for returning veterans and their families. In the '50s through '70s, FHA helped stimulate the production of millions of units of privately owned apartments for elderly, handicapped, and lower income Americans. When soaring inflation and energy costs in the 1970s threatened the economic viability of thousands of private apartment buildings, FHA's emergency financing kept cash-strapped properties afloat.

When a deep recession prompted private mortgage insurers to pull out of oil producing states in the 1980s, FHA moved in to stabilize falling home prices. During the difficult '80s, FHA programs made it possible for potential homebuyers to get the financing they needed.

The fixed rate mortgage is the most common FHA program. The FHA fixed mortgage is open to anyone using the property as a primary residence. FHA will not finance investors. The fixed mortgage program protects lenders against buyer default. A lender underwrites a loan, requiring the buyer to meet certain criteria defined by FHA. If the borrower can meet these requirements, the FHA insures the loan that the lender issued. Other types of lans are: Adjustable Rate Mortgage, Graduate Payment Mortgage, Growing Equity Mortgage, Energy Efficient Mortgage, and Mortgages for Condominium Units.

FHA fixed mortgage loans often require lower down payments than conventional mortgages – as low as 3 percent, compared to as much as 10 or 20 percent for conventional mortgages. This means you can borrow as much as 97% of the cost of the property.

If there is enough equity in the home at the time of purchase, the FHA will also allow the borrower to finance many of the closing costs associated with purchasing the home. Closing costs can range from 2 to 10 percent of the purchase price of the home, depending on the lender, so having the option to defer these payments and pay them off over time makes it easier for buyers to purchase homes.