What name is given to a mortgage loan that is backed or insured by a government agency?

What name is given to a mortgage loan that is backed or insured by a government agency?

• A. Conventional Loan
• B. Government Loan
• C. Private Loan
• D. Institutional Loan

Answer: (B)

A mortgage loan that is backed or insured by a government agency is referred to as a government loan. This category includes loans such as FHA (Federal Housing Administration) loans, VA (Department of Veterans Affairs) loans, and USDA (United States Department of Agriculture) loans. These loans are designed to help promote homeownership and are typically characterized by lower down payment requirements and more flexible credit requirements compared to conventional loans. Government loans provide security for lenders, as the backing or insurance mitigates the risks associated with lending to borrowers who may have lower credit scores or limited financial resources. This support can be crucial in facilitating access to homeownership for a wider range of the population, thus contributing to community development and stability. In contrast, conventional loans are not insured or backed by any government agency; they may adhere to guidelines set by Fannie Mae or Freddie Mac but do not have the same government support. Private loans and institutional loans also do not involve government backing, which distinguishes them from government loans.

A mortgage loan that is backed or insured by a government agency is referred to as a government loan. This category includes loans such as FHA (Federal Housing Administration) loans, VA (Department of Veterans Affairs) loans, and USDA (United States Department of Agriculture) loans. These loans are designed to help promote homeownership and are typically characterized by lower down payment requirements and more flexible credit requirements compared to conventional loans.

Government loans provide security for lenders, as the backing or insurance mitigates the risks associated with lending to borrowers who may have lower credit scores or limited financial resources. This support can be crucial in facilitating access to homeownership for a wider range of the population, thus contributing to community development and stability.

In contrast, conventional loans are not insured or backed by any government agency; they may adhere to guidelines set by Fannie Mae or Freddie Mac but do not have the same government support. Private loans and institutional loans also do not involve government backing, which distinguishes them from government loans.