NMLS Uniform State Test (UST) Mortgage Practice Exam 2026 – Your All-in-One Resource for Guaranteed Success!

The primary function of the Federal Housing Administration (FHA) is to insure loans made by approved lenders. By providing this insurance, the FHA essentially protects lenders against losses resulting from borrower defaults. This insurance makes it easier for lenders to offer loans to a broader range of applicants, including those with lower credit scores or smaller down payments, thus promoting homeownership.

The other options do not accurately reflect the FHA's role. While grants for first-time homebuyers are available through various programs, that is not the FHA’s primary purpose. The FHA does not provide direct mortgage loans; instead, it insures loans made by private lenders. Lastly, regulating interest rates generally falls under the jurisdiction of other entities and not the FHA, as it does not involve direct control over local lenders or their pricing strategies.