Insured Loan

Type of loan that has been insured by the Federal Housing Administration or a private mortgage insurance company.

Residential mortgage loan insured by the Federal Housing Administration (FHA) or by a mortgage insurance company. In event of default, the FHA indemnifies the holder of the mortgage for part, or all, of the unpaid principal. FHA-insured loans generally have a high ratio of loan to value, and frequently are pooled for sale to institutional investors as Ginnie Mae (Government National Mortgage Association) Pass-Through Certificates. Interest rates on FHA insured loans are set slightly below prevailing market rates on conventional mortgage loans. See also Credit Enhancement; Private Mortgage Insurance.