A United States government agency that provides mortgage insurance to qualified, FHA-approved lenders. FHA mortgage insurance helps protect lenders from losses associated with mortgage default; if a borrower defaults on a loan, the FHA will pay a specified claim amount to the lender.
When the Federal Housing Administration was established in 1934, it was intended to stimulate the housing industry. By providing insurance to lenders, the idea was that more people would be able to qualify for mortgages, and therefore, purchase a home. FHA loans are generally given to people who otherwise would be unable to qualify for a conventional home mortgage loan.