What type of insurance does the FHA provide?

The Federal Housing Administration (FHA) provides mortgage insurance, which is essential for safeguarding lenders against losses that may arise if a borrower defaults on their mortgage payments. This insurance enables lenders to offer loans with lower down payment requirements, making homeownership more accessible to individuals who might otherwise be unable to afford a home. The FHA’s insurance protects the lender up to a certain percentage of the loan amount, thereby encouraging them to lend to borrowers who may have lower credit scores or limited financial history. By reducing the risk associated with lending, the FHA plays a significant role in promoting stability and availability in the housing market, contributing to increased homeownership rates.