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FHA Insured Loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA does not make loans. Rather, it insures loans made by private lenders and pays the lender if the homebuyer defaults on the loan. The first step in obtaining an FHA loan is to contact several lenders and/or mortgage brokers and ask them if they are FHA-Approved by the U.S. Department of Housing and Urban Development to originate FHA loans. FHA alows first time homebuyers to put down as little as 3.5% and receive up to 6% towards closing costs. As each lender sets its own rates and terms, comparison shopping is important in this market.