What is an FHA loan primarily designed for?

An FHA loan is primarily designed to assist first-time homebuyers, particularly those who may have lower credit scores or less money for a down payment. The Federal Housing Administration (FHA) insures these loans, allowing lenders to offer more favorable terms to borrowers who might not qualify for conventional financing. This includes features such as a lower minimum down payment requirement, often as low as 3.5%, and more flexible credit score standards.

By targeting first-time buyers, FHA loans play a critical role in making homeownership accessible to a wider audience, especially those who may face challenges in obtaining traditional loans. The focus on aiding individuals with limited financial means is what distinguishes FHA loans from other types of financing options available for investment properties, luxury homes, or development projects.