The Federal Housing Administration helps prospective homeowners by ______.

The Federal Housing Administration (FHA) plays a crucial role in the housing market by providing insurance to lenders on mortgages they issue, which enables them to offer more favorable terms to homebuyers, especially those with lower incomes. This insurance helps lenders feel more secure about extending loans, which can lead to the requirement that a certain percentage of these loans goes to low-income individuals and families.

This initiative helps to increase access to homeownership by allowing lenders to reduce down payment requirements and lower interest rates, making it much easier for first-time and low-income buyers to qualify for home loans. By creating this safety net for lenders, the FHA effectively champions homeownership among those who may otherwise struggle to obtain financing.

The other options, while they may seem related to assistance programs, do not accurately describe the FHA's primary role. For instance, the FHA does not provide grants directly or offer tax benefits to homebuyers. Additionally, it does not insure all mortgages directly but rather provides insurance specifically for loans that meet certain criteria under its program.