What is the primary function of the FHA in real estate transactions?

The primary function of the Federal Housing Administration (FHA) in real estate transactions is to provide mortgage insurance. This insurance protects lenders against the risk of default on loans that are issued to homebuyers, particularly those who may not qualify for conventional financing due to lower credit scores or smaller down payments. By insuring these loans, the FHA encourages lenders to offer more favorable financing terms, ultimately making homeownership more accessible for a broader range of individuals.

The ability to provide mortgage insurance also plays a significant role in promoting stability in the housing market. It helps to ensure that even those who might struggle to secure a traditional loan can still become homeowners, thereby bolstering overall housing demand.

Other options, while relevant to the broader real estate and housing landscape, do not accurately represent the primary function of the FHA. For instance, facilitating home inspections, regulating real estate agents, and managing foreclosure sales are not direct roles of the FHA. Instead, these activities are typically handled by private inspectors, state licensing boards, and various financial institutions or government agencies involved in the foreclosure process.