What is the primary purpose of the Federal Housing Administration?

The primary purpose of the Federal Housing Administration (FHA) is to insure loans made by private lenders for residential properties. This insurance protects lenders against losses in the event of borrower default, which makes lenders more willing to extend credit to borrowers who may not qualify for conventional loans due to lower credit scores or smaller down payments. By providing this insurance, the FHA helps increase homeownership opportunities and provides greater access to housing finance, thereby contributing to overall stability in the housing market.

The other options do not accurately depict the FHA's role. For instance, while the FHA plays a crucial role by insuring loans, it does not guarantee loans in the same way that agencies like Fannie Mae or Freddie Mac do. The FHA is not a financial institution that directly lends money or sells loans; rather, it operates as an insurance program for loans issued by approved mortgage lenders.