Which loan is backed by a government agency?

A loan that is backed by a government agency is typically designed to reduce risk for lenders, enhance borrower access to funds, and promote homeownership, especially for those who may not qualify for conventional financing. The FHA loan, which stands for Federal Housing Administration loan, is insured by the FHA, a government agency. This insurance protects lenders against losses if borrowers default on their loans, making lenders more willing to issue loans at lower down payment requirements and more flexible credit specifications.

In this context, conventional loans are not backed by any government agency; they rely entirely on the creditworthiness of the borrower. Private loans are generally offered by private lenders and may not have the same backing or protections as government-sponsored loans. Lastly, hard money loans are often based on the value of the property rather than the creditworthiness of the borrower and typically do not involve any government backing. Thus, the FHA loan is the only option that is clearly supported by a government agency, which enhances its accessibility and affordability for homebuyers.