When are FHA loans primarily used?

FHA loans are primarily used for first-time homebuyers to promote affordable housing because they are designed to provide financial assistance to those who may not have a significant amount of savings for a down payment or who may have lower credit scores. The Federal Housing Administration (FHA) insures these loans, allowing lenders to offer more favorable terms, such as lower down payments (as low as 3.5%) and flexible credit requirements. This makes homeownership more accessible for individuals and families who might otherwise struggle to qualify for traditional mortgage options.

While FHA loans can also be utilized for refinancing existing mortgages or purchasing investment properties, their primary intent and the demographic they serve is aimed at helping first-time buyers gain access to affordable housing options. This focus aligns with the FHA's mission to promote homeownership, particularly among those who might face barriers in the conventional mortgage market.