What is the primary function of the Federal Housing Administration (FHA) in a mortgage transaction?
Correct Answer
B) Insures lenders against borrower default
The FHA does not lend money directly to borrowers. Instead, it insures FHA-approved lenders against losses if a borrower defaults. This insurance encourages lenders to offer loans with lower down payments and more flexible qualifying criteria. VA loans, not FHA loans, are reserved for eligible veterans and service members.
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