### What is an FHA loan? - [x] A loan underwritten by a federal program designed to assist homebuyers who might not qualify for conventional financing - [ ] A loan provided specifically by private lenders for luxury properties - [ ] A conventional loan that requires lower down payments and high-interest rates - [ ] A loan only for real estate investment purposes > **Explanation:** An FHA loan is a type of mortgage insured by the Federal Housing Administration which aims to assist people who might not qualify for conventional financing. These loans are particularly beneficial for individuals with modest incomes or poor credit histories. ### What is the minimum down payment required for an FHA loan? - [ ] 10% - [ ] 20% - [x] 3% or less - [ ] 5% > **Explanation:** FHA loans typically require a down payment of only 3% or less, making them more accessible to individuals who may find it challenging to save for large down payments as required by conventional loans. ### Who is the primary applicant for FHA loans? - [ ] Luxury property buyers - [ ] Investors looking to flip properties - [ ] Borrowers with perfect credit scores - [x] People with modest incomes or in the process of rebuilding their credit > **Explanation:** FHA loans are designed to assist people who have modest incomes or are rebuilding their credit and might not qualify for conventional financing. ### How many years past declaring bankruptcy must a person be to qualify for FHA financing? - [x] Two years - [ ] One year - [ ] Four years - [ ] Five years > **Explanation:** Applicants need to be two years past declaring bankruptcy to be eligible for FHA loans, which keep the door open for those who are rebuilding their financial stability. ### One of the benefits of FHA loans is: - [ ] Higher interest rates - [ ] Stringent credit requirements - [x] Lower interest rates - [ ] No down payment > **Explanation:** FHA loans generally offer lower interest rates compared to conventional loans, making home financing more affordable for individuals with modest incomes or those rebuilding their credit. ### Who insures FHA loans? - [ ] Private loan insurance companies - [ ] The borrower themselves - [ ] Real estate agents - [x] The Federal Housing Administration (FHA) > **Explanation:** FHA loans are insured by the Federal Housing Administration (FHA), which reduces the risk to lenders, thus encouraging them to offer loans to a broader range of borrowers. ### What is the payer's obligation if they default on an FHA loan? - [ ] They are no different than with private loans - [x] The FHA insures the lender against loss - [ ] The government makes all future payments - [ ] They lose the ability to secure any future loans > **Explanation:** If the borrower defaults on an FHA loan, the Federal Housing Administration insures the lender against loss, thereby reducing the financial risk to the lender. ### Why might FHA loans be easier for those with poor credit histories to obtain? - [ ] They require larger down payments - [ ] They are offered only by charitable trusts - [x] They are more forgiving with respect to credit scores - [ ] They have higher repayment amounts > **Explanation:** FHA loans are more forgiving with respect to credit scores and, thus, are more accessible to those with less than perfect credit histories. ### What must be provided to the lender by FHA in case the borrower defaults? - [ ] A foreclosure notice - [ ] Assistance with refinancing - [ ] Reduced loan payments - [x] Insurance coverage for the loss > **Explanation:** In case of borrower default, the FHA provides insurance coverage to the lender for any financial loss incurred. ### Which group benefits the most from the lower interest rates offered by FHA loans? - [ ] Real estate brokers - [ ] Private investors - [ ] Conventional loan applicants - [x] Lower income homebuyers > **Explanation:** Lower income homebuyers benefit the most from the lower interest rates offered by FHA loans, making homeownership more affordable and attainable.