What is the primary function of the Federal Housing Administration (FHA)?

The primary function of the Federal Housing Administration (FHA) is to insure mortgages. This means that the FHA provides mortgage insurance on loans made by approved lenders to borrowers with low to moderate incomes. By insuring these loans, the FHA encourages lenders to offer loans to individuals who may not qualify under traditional circumstances. This insurance protects lenders from losses if the borrower defaults on the loan, which in turn allows for more accessible home financing options for borrowers, particularly first-time homebuyers.

The FHA does not provide grants to homebuyers, regulate mortgage interest rates, or directly offer down payment assistance. Its main role revolves around the insurance aspect, which significantly impacts the housing market by promoting home ownership and providing stability in lending practices.