An FHA Loan is insured by the Department of HUD(Housing and Urban Development) to the lender, and:
1.) Maximum loan amount is currently $121,296,
2.) Loan amounts over $50,000 require 2.25% down payment,
3.) Loan amounts less than $50,000 require 1.25% down payment,
4.) Buyer's total investment must be at least 3% of sale price,
5.) Monthly mortgage insurance premium(MIP) is equal to loan amount X .50% /,
6.) Up front MIP is 2.25%, unless buyer takes a First Time Homebuyers class which reduces it to 1/75%. UFMIP can be added to the loan amount,
7.) The ratio is 29% housing and 41% debt to income,
8.) More flexible credit standards,
9.) The purpose is to provide home ownership opportunities to creditworth borrowers and borrowers who can afford the payments, but do not have a lot of upfront cash.