by 
The Curious Bag
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FHA-backed mortgages are home loans that the Federal Housing Administration guarantees. This guarantee makes the loan a lower risk for lenders because the FHA protects their investment in case the borrower defaults.
History
The Federal Housing Administration was created in 1934, during the depths of the Great Depression, to help people with a lower income obtain a mortgage.
Benefits
With an FHA-backed loan, you can make a down payment of as low as 3.5 percent. As of summer of 2010, you will need a credit score of at least 580 or a minimum down payment of 10 percent.
Types
FHA-backed mortgages can be used to purchase a condominium and a one- to four-unit home. However, you must make at least one of the units your home.
Considerations
When you take out an FHA mortgage, you must pay a 1.75 percent fee at the origination. This fee was to rise to 2.25 percent in spring 2010. You must also pay a 0.5 percent annual fee for mortgage insurance until you attain 22 percent equity in your home.
Function
You obtain an FHA mortgage through participating lenders, not the FHA itself. You must be approved by the lender rather than the FHA.
Loan Limits
The amount you can borrow with an FHA-backed mortgage depends on the housing costs in your area and is adjusted each year for inflation.
Source:
Bankrate: FHA vs. Conventional Mortgages
FHA Today: FHA Mortgage 203(b)
Chicago Tribune: FHA Homeownership Rules to Change
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