What type of mortgage is insured against the borrower's default by the FHA?

What type of mortgage is insured against the borrower's default by the FHA?

• A. Conventional Mortgage
• B. FHA Insured Mortgage
• C. VA Loan
• D. Jumbo Loan

Answer: (B)

The FHA Insured Mortgage is specifically designed to offer protection against the borrower’s default. This type of mortgage is backed by the Federal Housing Administration (FHA), which provides a guarantee to lenders that they will be compensated for any losses incurred due to default. This insurance allows lenders to offer loans to borrowers who may not qualify for conventional financing due to lower credit scores or lack of a significant down payment. The FHA mortgage program aims to promote homeownership among all individuals, particularly first-time buyers, by making it more accessible through lower down payment requirements and less stringent credit criteria. Therefore, the insurance against the borrower's default encourages lenders to provide loans to a broader range of borrowers, knowing that the FHA will cover potential losses. In contrast, other types of mortgages mentioned do not have this specific insurance backing from the FHA: conventional loans rely on the borrower’s creditworthiness; VA loans are supported by the Department of Veterans Affairs but are specific to eligible veterans; and jumbo loans exceed conforming loan limits and do not have government backing. Each of these alternatives operates under different criteria and risks compared to an FHA insured mortgage.

The FHA Insured Mortgage is specifically designed to offer protection against the borrower’s default. This type of mortgage is backed by the Federal Housing Administration (FHA), which provides a guarantee to lenders that they will be compensated for any losses incurred due to default. This insurance allows lenders to offer loans to borrowers who may not qualify for conventional financing due to lower credit scores or lack of a significant down payment.

The FHA mortgage program aims to promote homeownership among all individuals, particularly first-time buyers, by making it more accessible through lower down payment requirements and less stringent credit criteria. Therefore, the insurance against the borrower's default encourages lenders to provide loans to a broader range of borrowers, knowing that the FHA will cover potential losses.

In contrast, other types of mortgages mentioned do not have this specific insurance backing from the FHA: conventional loans rely on the borrower’s creditworthiness; VA loans are supported by the Department of Veterans Affairs but are specific to eligible veterans; and jumbo loans exceed conforming loan limits and do not have government backing. Each of these alternatives operates under different criteria and risks compared to an FHA insured mortgage.