Does the Federal Housing Administration provide loans directly to borrowers?

The Federal Housing Administration (FHA) does not provide loans directly to borrowers. Instead, it insures loans made by approved lenders to eligible borrowers. This insurance protects the lender against losses if the borrower defaults on the loan, which encourages banks and mortgage companies to offer loans to individuals who may not qualify for traditional financing due to lower credit scores or smaller down payments.

By insuring these loans, the FHA helps make homeownership more accessible for a broader segment of the population, particularly first-time homebuyers and those with less-than-perfect credit. The loans are issued through private lenders, meaning that borrowers work with banks or mortgage companies to secure the financing they need. This structure is essential in facilitating the flow of credit in the housing market while minimizing risk for lenders.

The other options provided do not accurately reflect the role of the FHA in the mortgage process. The FHA’s support is not limited to first-time homebuyers or multi-family units; it applies to various types of conventional home purchases, aligning with its mission to promote affordable housing.