Which of the following best describes the purpose of the FHA?

The purpose of the Federal Housing Administration (FHA) is fundamentally tied to the insurance of loans made by approved lenders. By providing this insurance, the FHA helps to mitigate the risk lenders face when offering loans, particularly in fluctuating economic conditions. This, in turn, encourages lenders to approve loans for a wider demographic, including those who might not qualify for conventional financing due to lower credit scores or smaller down payments.

Insuring these loans allows the FHA to promote home ownership by making it more accessible to individuals who might otherwise struggle to secure financing. Through this insurance, the FHA can stabilize the housing market and support the construction and purchase of homes, especially during times of economic uncertainty.

The other options focus on narrower aspects of housing and lending. For instance, while the FHA does help first-time buyers, its objective is not limited to this group; it extends to various home buyers who meet eligibility requirements. Additionally, the FHA does not manage federal land for housing development, nor does it set interest rates for real estate loans—functions that fall under different governmental and financial regulatory bodies.