Federal Housing Administration

What Does Federal Housing Administration Mean?

The Federal Housing Administration (FHA), established in 1934, is a federal agency that provides mortgage insurance to qualified lenders. By offering this insurance, the FHA boosts lenders’ confidence in extending mortgage loans to borrowers.

Insuranceopedia Explains Federal Housing Administration

Since mortgages can be very expensive, many people find it difficult to secure mortgage loans to buy a house. With FHA-backed insurance, mortgage lenders are assured that they will not suffer significant losses if a borrower defaults on their mortgage payments. As a result, they can issue loans to a broader range of borrowers.

Many of those borrowers are first-time buyers who would otherwise struggle to qualify for a conventional mortgage, which is why so much of the practical advice on home insurance for first-time buyers overlaps with FHA loan questions. Lenders require proof of homeowners coverage before they will close on the loan, so it pays to compare quotes from the best homeowners insurance companies early in the process to avoid delays at settlement.