What are FHA loans primarily designed for?

FHA loans are primarily designed to provide financing options for one-to-four family, owner-occupied homes. The Federal Housing Administration (FHA) insures these loans, allowing lenders to offer more flexible terms, including lower down payment requirements compared to conventional loans. This makes home ownership more accessible to a wider range of borrowers, particularly first-time home buyers and those with less-than-perfect credit.

The appeal of FHA loans lies in their liberal down payment options, which can be as low as 3.5% of the purchase price, thus enabling borrowers to enter the housing market without needing substantial savings for a larger down payment. By focusing on owner-occupied homes, FHA loans also seek to promote stability in neighborhoods and support home ownership as a path to wealth-building for individuals and families. Other options mentioned, such as investment properties or commercial ventures, are not aligned with the primary mission of FHA loans, which focuses on supporting residential home buyers.