DEFINITION of 'National Housing Act'

Federal legislation passed in 1934 to create the Federal Housing Administration (FHA). Its purpose is to make credit more available to lenders for home repairs and construction and to make better housing available to low- and moderate-income families. The National Housing Act also led to the 1937 creation of Fannie Mae, a national mortgage association that provides a secondary mortgage market and further improves the availability of loan money.

BREAKING DOWN 'National Housing Act'

To this day, the FHA plays a major role in making home ownership a possibility for greater numbers of people. For example, it facilitates mortgages with down payments as low as 3.5% instead of the 20% traditionally required by conventional lenders. Its lending guidelines also allow banks to consider an applicant's whole financial picture instead of relying solely on strict guidelines and formulas.

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