What does the Federal Housing Administration (FHA) primarily do?

The Federal Housing Administration (FHA) primarily offers mortgage insurance on loans made by approved lenders. This function is crucial as it helps to reduce the financial risk lenders face when providing mortgages, particularly to first-time homebuyers or those with lower credit scores. By insuring these loans, the FHA makes it easier for consumers to secure financing, as lenders are more willing to provide loans when they know a portion of their risk is mitigated through insurance.

The FHA’s mortgage insurance also allows borrowers to qualify for loans with lower down payments and competitive interest rates. This accessibility fosters homeownership among various demographics, contributing to the stability of the housing market and promoting affordable housing options. Therefore, the primary objective of the FHA revolves around insuring mortgage loans to facilitate home purchases rather than providing direct grants, regulating interest rates, or establishing property tax policies.