What type of mortgage is safeguarded by the Federal Housing Administration (FHA)?

What type of mortgage is safeguarded by the Federal Housing Administration (FHA)?

• A. Conventional Mortgage
• B. Insured Mortgage
• C. Subprime Mortgage
• D. Reverse Mortgage

Answer: (B)

A mortgage safeguarded by the Federal Housing Administration (FHA) is known as an insured mortgage. This type of mortgage is specifically designed to assist borrowers who may have lower credit scores or limited down payment abilities. The FHA provides insurance to lenders against losses that may occur if the borrower defaults on the loan. This insurance makes lenders more willing to offer loans to individuals who might not qualify for conventional financing, thereby increasing homeownership opportunities. The FHA's insurance also means that borrowers might pay a higher mortgage insurance premium compared to a conventional loan. Still, they benefit from favorable terms, such as lower down payment requirements and potentially lower interest rates, making homeownership more accessible. In contrast, conventional mortgages are not insured by the government and are usually available to borrowers with stronger credit profiles. Subprime mortgages refer to loans issued to borrowers with poor credit histories, often accompanied by higher interest rates due to the greater risk involved. Reverse mortgages, aimed primarily at older homeowners, allow them to convert part of their home equity into cash, but they are also not insured by the FHA in the same way as FHA-insured mortgages.

A mortgage safeguarded by the Federal Housing Administration (FHA) is known as an insured mortgage. This type of mortgage is specifically designed to assist borrowers who may have lower credit scores or limited down payment abilities. The FHA provides insurance to lenders against losses that may occur if the borrower defaults on the loan. This insurance makes lenders more willing to offer loans to individuals who might not qualify for conventional financing, thereby increasing homeownership opportunities.

The FHA's insurance also means that borrowers might pay a higher mortgage insurance premium compared to a conventional loan. Still, they benefit from favorable terms, such as lower down payment requirements and potentially lower interest rates, making homeownership more accessible.

In contrast, conventional mortgages are not insured by the government and are usually available to borrowers with stronger credit profiles. Subprime mortgages refer to loans issued to borrowers with poor credit histories, often accompanied by higher interest rates due to the greater risk involved. Reverse mortgages, aimed primarily at older homeowners, allow them to convert part of their home equity into cash, but they are also not insured by the FHA in the same way as FHA-insured mortgages.