What is a distinguishing feature of FHA loans?

A distinguishing feature of FHA loans is that they are insured by the Federal Housing Administration. This insurance protects lenders against losses that may occur if the borrower defaults on the loan. The government backing provided through this insurance allows lenders to offer more favorable terms to borrowers, such as lower down payment requirements and more lenient credit score standards. This makes FHA loans particularly popular among first-time homebuyers and those with limited financial resources, as they can access mortgage financing that might otherwise be unavailable through conventional loan programs.

Other options do not align with the characteristics of FHA loans. For example, requiring double the down payment of conventional loans does not accurately reflect FHA loan requirements, which typically allow for lower down payments. Additionally, FHA loans are specifically aimed at residential properties, not commercial real estate. Lastly, FHA loans do not operate exclusively on a variable interest rate basis; they can also have fixed rates, making them more versatile compared to the structure stated in that option.