History of the FHA Loan
During the Great Depression of 1934, Congress established the Federal Housing Administration. At the time, the housing market was in trouble: default and foreclosure rates had surged, 50% down payments were customary, and mortgage terms were out of reach for average income earners. As a result, the United States was predominantly a renter nation, with only one out of every ten households owning their own home. The FHA was founded by the government to decrease lender risk and make it easier for borrowers to qualify for home loans. According to studies conducted by the Federal Reserve Bank of St. Louis, the homeownership rate in the United States gradually increased, reaching an all-time high of 69.2% in 2004. In the second quarter of 2023, the rate was 65.9%.