Government-Insured Mortgages (FHA, VA, USDA) Flashcards
everything to do with government loans as well as ensure you know the differences between the big three.
The term ‘government-insured’ is a very broad category of mortgage type in US lending law. What is this type of mortgage exactly?
A. An automatically insured mortgage.
B. A government-backed mortgage.
C. A private lending mortgage.
D. An endorsed congress mortgage.
Correct answer: B
B is correct, as a government-insured mortgage is a type of non-conventional mortgage loan that is lent by government agencies to borrowers of low credit scores and incomes. A borrower with a credit score
below 620 may be unsuitable for a conventional mortgage, so a government
loan will be an easier option. There are three main mortgage types in this
category that each cover different exceptional circumstances, an FHA loan,
a VA loan, and a USDA loan.
A government-insured mortgage offers loans to those in low-income circumstances. Of these loans offered the FHA loan is the most popular, but what does this loan offer?
A. Government insurance.
B. Loan limits and credit score requirements.
C. Down payment requirements.
D. Set interest rates.
E. All the above.
Correct answer: E
E is correct because an FHA mortgage is a government loan that requires government insurance as part of their loan requirements for borrowers. They have set loan limits, credit score requirements, down payment
minimums, and interest rates. An FHA mortgage is popular with first-home buyers, families, and those in mid to low-income situations.
A special mortgage loan offered to veterans is the VA loan and is a great mortgage for military service members. But is it true that this loan can also be a loan acquired by family members or widows?
A. True.
B. False
Correct answer: AA is correct because a VA loan is a government mortgage
targeting veterans, service members, and their surviving families seeking to
purchase or modify the property. The U.S. Department of Veterans Affairs
issues a VA loan with little to no down payment requirements, great interest
rates, and no insurance requirements.
During exceptional events such as an earthquake or flood, applicants may have to acquire a mortgage to live in a warm and safe home. This is when the USDA loan comes in, but what are the limitations of whom can apply for this loan?
A. It is a mortgage loan aimed at urban developers.
B. It is a mortgage loan aimed at rural developers.
C. It is a mortgage for low-income rural home buyers.
D. B & C.
Correct answer: C
C is correct, as a USDA mortgage is aimed at low-income rural borrowers
who want to purchase a home. The U.S. Department of Agriculture (USDA)
issues these loans to those that do not have a high enough credit score or the
income to obtain conventional loans. This program is aimed at those in
unhealthy homes or unsafe rural conditions by providing them with a loan
to find a safe and warm place to live. What makes this even better is that
applicants also have 0% down payment requirements.
Due to a range of factors people don’t take on a conventional mortgage. Why do people take a government-insured mortgage instead?
A. Low credit scores.
B. Low income.
C. Emergency housing.
D. All the above.
Correct answer: D
D is correct, as people take a government-insured mortgage for many
reasons. The most significant factors include low credit scores and low
income, which makes it impossible for borrowers to qualify for
conventional loans from private lenders, so they must rely on government
agencies to provide them with a loan. The other factors include emergencies
such as natural disasters or loss of income providers, so more specific
government loans also cover these exceptional circumstances (USDA &
VA).
There are many types of government mortgages, but from this selection what is NOT part of any government mortgage benefits?
A. Government insurance (PMI).
B. Service members get half-price loans.
C. Low-income rural housing cover.
D. Government standardization of the mortgage market.
Correct Answer: B
B is the correct answer because VA loans do not offer service members halfprice discounts on mortgage loans. Instead, VA loans expect to offer
applicants a military loan that gives a mortgage for serving military
members, veterans, and surviving families.
If an applicant came to a lender with a complex case, it is always good to think about the wide range of mortgage options rather than picking the easiest conventional mortgage each time. So, what is the best government loan for a veteran with a destroyed farm after a fire?
A. A USDA loan.
B. An FHA loan.
C. A VA loan.
D. A conventional mortgage.
E. Either A or C.
Correct Answer: E
E is correct because a lender should think about their clients and make the
best choice for their unique situation. Thus, A or C is a good choice for this
specific scenario because if the applicant is looking for a rural place to live
after their farm was destroyed by a fire it is a solid idea to suggest either a
USDA loan or even a VA loan as they are also a veteran. Why the USDA
loan? It’s the perfect cover for emergency housing if they are also of a lowincome with low credit rating and they can fund their new home with little
to NO deposit fee. Although why the VA loan as well? Veterans are
rewarded for their military service with a $0 down payment, no insurance,
low fixed interest rates, flexibility and low credit requirements.
For those taking on a government loan, what is the credit score requirement?
A. 450.
B. 620.
C. There is no minimum.
D. It depends on the loan.
Correct answer: D
D is correct, as although it is well-known that government mortgages make
it drastically easier for low credit applicants to get a loan compared to
conventional loans, it all comes down to the type of loan they apply for. So,
if you have a credit rating of 620 in most cases it would be better to apply
for a private loan as this is the minimum for a conventional loan.
What’s the perfect mortgage for first-home buyers with a low credit rating?
A. A balloon mortgage.
B. VA loan.
C. FHA loan.
D. USDA loan
Correct answer: C
C is correct, as an FHA loan is the best mortgage loan insured by the
government for the average applicant with a low credit rating that does not
qualify for other mortgages. FHA is aimed at those of low income and
credit rating, such as first-home buyers that are looking for the first step on
the property ladder. FHA mortgages also have low down payments, and the
exact amount depends on the credit rating.
