Question

A requirement for a borrower under an FHA-insured loan is that he provide a minimum down payment, typically as a percentage of the home's purchase price, as specified by the FHA guidelines.

1) True
2) False

Answer 1

The statement is true; FHA-insured loans require a minimum down payment as per FHA guidelines, which typically ranges from 0-3.5%, lower than the traditional 20% down payment recommendation.

Step-by-step explanation:

A requirement for a borrower under an FHA-insured loan is that they provide a minimum down payment, typically as a percentage of the home's purchase price, as specified by FHA guidelines. While the traditional down payment advice is to put down 20% of the home's purchase price, FHA-insured loans exist to make homeownership more accessible, typically requiring a lower down payment that can range from around 0-3.5%.

However, these reduced down payment requirements come with the obligation to obtain mortgage insurance, which protects the lender if the borrower defaults. This insurance represents an additional cost throughout the loan.