New York Real Estate Salesperson ExaminationFinancingEasy
A first-time homebuyer with limited savings is looking for a mortgage that requires a very low down payment, often as low as 3.5%, and is insured by the federal government. Which type of loan is most suitable for this buyer?
- AUSDA loan
- BConventional loan
- CVA loan
- DFHA loan
Show answer & explanationAnswer & explanation
Correct answer: D. FHA loan
FHA loans are government-insured mortgages designed to help low-to-moderate-income borrowers, especially first-time homebuyers, by requiring lower down payments and having more flexible credit requirements.
Why the other options are wrong
- A. USDA loans are for properties in eligible rural areas and offer 0% down payment, but have income limitations and property location restrictions.
- B. Conventional loans typically require higher down payments (e.g., 5-20%) unless private mortgage insurance is involved.
- C. VA loans are for eligible service members, veterans, and surviving spouses, and typically require no down payment, but have specific eligibility criteria.
FHA Loan
A mortgage loan insured by the Federal Housing Administration (FHA) designed to make homeownership more accessible, especially for first-time homebuyers.
- Requires a low down payment (as low as 3.5%).
- Has more flexible credit score requirements.
- Requires mortgage insurance premiums (MIP).
Memory trick: FHA helps first-timers find their home's safe haven.