What Is the Primary Purpose of FHA?

The primary purpose of The Federal Housing Administration, generally known as FHA, is to provide mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. The FHA guarantees the loans, offering financial protection for lenders in the case of a default by the homeowner.

History of the FHA

Congress created the FHA in 1934, and since then it has insured more than 34 million properties. In 1965 the FHA became a part of the Department of Housing and Urban Development (HUD).

Not A Lender

The FHA does not lend money directly. It simply insures mortgage loans made by FHA-approved lenders. According to its website, the FHA is the only government agency that operates entirely from its self-generated income. Proceeds from the mortgage insurance premiums paid by homeowners fund the FHA.

Flexibility

The FHA insures mortgages on many kinds of housing, including single-family and multi-family homes, apartment buildings and manufactured homes.

Costs Less

FHA loans feature competitive interest rates because the federal government insures the loan. That minimizes risk for lenders, and they pass along savings in the form of competitive rates.

Other Benefits

In addition to protecting lenders, the FHA continues to work with borrowers after the sale, including providing special assistance to homeowners facing foreclosure because of hard times.

References

• The Federal Housing Administration
• What Is The Purpose Of The FHA?

Resources

• The FHA Resource Center