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

The primary function of the Federal Housing Administration (FHA) is to insure loans made by approved lenders. This insurance protects lenders against losses that may arise from borrower default, thereby encouraging them to offer loans to homebuyers who might not otherwise qualify due to lower credit scores or limited funds for a down payment. By reducing the risk for lenders, FHA insurance promotes homeownership among a broader segment of the population, particularly first-time buyers and those with less-than-perfect credit.

The FHA does not provide grants for housing, manage public housing, or directly regulate mortgage rates. These aspects fall under different federal programs or agencies. The FHA's primary focus on insuring loans allows it to play a crucial role in the housing market by making home loans more accessible.