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What Is the Federal Housing Administration?

The FHA insures home loans for people who need financial help.
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  • Written By: Jacob Queen
  • Edited By: Lauren Fritsky
  • Last Modified Date: 30 March 2014
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The Federal Housing Administration is a US government-controlled program designed to insure home loans. When people need a home loan, but they don’t quite reach the credit or income requirements of a normal loan, sometimes the Federal Housing Administration can help insure that loan. In order to qualify for these loans, the home being purchased needs to meet certain requirements, and it’s easier for certain people to get loans, including first-time home buyers, for example.

When the Great Depression hit in the late 1920s, it had a very detrimental effect on the US housing market. The Federal Housing Administration was created during the early 1930s as a way to resolve this problem. The government wanted to encourage more home ownership, and the Housing Administrations insurance programs were designed to do that. Home ownership is generally more common in the US than in many other countries, and the Federal Housing Administration is often given a lot of credit for this.

Over time, the program has evolved as the economic situation in the US has changed. During times of economic difficulty, the program has often been changed so that even more people can get homes, and this has been used to improve sales and wake up the housing market. The Federal Housing Administration is operated so that it can generate a profit, and there are limits on how far it can go in trying to stimulate home buying, but there have been adjustments at various times.

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During its history, the Federal Housing Administration has also operated to encourage home ownership among certain groups. For example, it was used to help finance homes for veterans returning from World War II. It has also been used to help insure loans for people living in difficult economic situations as a way to give them a better chance at prosperity.

During the economic difficulties of the US in the late 2000s, the housing market was particularly hard-hit. The values of many homes were much lower than their original prices, and many people were defaulting. The damage to the market was so severe that it was actually hurting the Housing Administration’s ability to make a profit. As a result, adjustments were made to increase the difficulty of getting a Federal Housing Administration loan by requiring more impressive credit and income levels. There were also changes made so that the Housing Administration could help people who were on the verge of defaulting on their houses as a way to lower the number of foreclosures.

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