Texas Real Estate Sales Agent ExamFinancingMedium
A buyer is applying for an FHA loan. Which of the following statements about FHA loan requirements is FALSE?
- AFHA loans are insured by the Federal Housing Administration.
- BFHA loans require mortgage insurance premiums (MIP).
- CFHA loans have specific property standards that must be met.
- DFHA loans typically require a higher credit score than conventional loans.
Show answer & explanationAnswer & explanation
Correct answer: D. FHA loans typically require a higher credit score than conventional loans.
FHA loans are known for being more accessible to borrowers with lower credit scores compared to conventional loans, which often have stricter credit requirements. Therefore, the statement that FHA loans typically require a higher credit score is false.
Why the other options are wrong
- A. FHA loans are indeed insured by the Federal Housing Administration, which protects lenders against borrower default.
- B. FHA loans do require both upfront and annual mortgage insurance premiums (MIP).
- C. FHA loans have specific property standards (minimum property requirements) to ensure the home is safe, sound, and sanitary.
FHA Loan Characteristics
Government-insured loans designed to make homeownership more accessible, especially for first-time homebuyers or those with lower credit scores.
- Insured by Federal Housing Administration (FHA).
- Lower down payment requirements (as low as 3.5%).
- More lenient credit score requirements than conventional loans.
- Require Mortgage Insurance Premiums (MIP).
Memory trick: FHA: Flexible Home Access, but with insurance costs.