Which program helps Americans buy homes through mortgage insurance?

• A. Department of Housing and Urban Development (HUD)
• B. Federal Housing Administration (FHA)
• C. Fannie Mae
• D. Veterans Administration

Answer: (B)

The Federal Housing Administration. It was created in the 1930s to stimulate homeownership during the Depression by insuring mortgages made by private lenders. This insurance reduces the risk for lenders, which makes them more willing to issue loans to buyers who might have smaller down payments or less-than-perfect credit. Because the loan is insured, borrowers can typically qualify with a lower down payment (as low as about 3.5%) and longer repayment terms, making it easier to buy a home. HUD oversees housing policy and programs, Fannie Mae buys mortgages to support liquidity in the market, and the Veterans Administration offers loan guarantees to veterans (often with favorable terms and without private mortgage insurance). The program specifically tied to mortgage insurance is the Federal Housing Administration.