A mortgage loan that is guaranteed by the Federal Housing Administration (FHA) in lieu of private mortgage insurance. FHA guidelines are not as strict as Fannie Mae or Freddie Mac’s and are designed for borrowers, such as first-time home buyers, who can’t make a large down payment. A typical FHA loan requires a minimum cash down payment of 3% on the part of the buyer, and that can be from a gift or grant. Sellers must pay part of the closing costs; borrowers can include their closing costs in the loan amount. FHA loans also are assumable, meaning a new buyer can take over the existing loan. Rates for FHA loans may be slightly higher than conventional loan rates (those not guaranteed by the government).