Florida Real Estate Sales Associate Examination Content OutlineReal Estate FinanceEasy
A buyer is interested in purchasing a home with a low down payment and does not have perfect credit. Which type of loan, backed by the federal government, is specifically designed to assist borrowers in this situation by insuring the loan for the lender?
- AFHA loan
- BConventional loan
- CVA loan
- DPortfolio loan
Show answer & explanationAnswer & explanation
Correct answer: A. FHA loan
FHA loans are government-backed loans designed to help low-to-moderate-income borrowers, first-time homebuyers, and those with less-than-perfect credit qualify for mortgages with lower down payments and easier credit requirements. The FHA insures the loan for the lender, reducing the lender's risk.
Why the other options are wrong
- B. Conventional loans typically require higher credit scores and larger down payments.
- C. VA loans are specifically for eligible service members, veterans, and surviving spouses, not general low-to-moderate-income buyers.
- D. Portfolio loans are held by the originating lender and do not typically involve government insurance or specific programs for low down payment/poor credit.
FHA Loan
A mortgage loan insured by the Federal Housing Administration (FHA), a government agency that provides mortgage insurance on loans made by FHA-approved lenders throughout the United States.
- Low down payment requirements (as low as 3.5%)
- More flexible credit score requirements
- Mortgage insurance premium (MIP) is required
- Designed for moderate-to-low-income borrowers and first-time homebuyers
Memory trick: FHA helps 'First Home Aspirants' with Federal Help.