Which mortgage type requires a lower down payment often associated with FHA loans?

Which mortgage type requires a lower down payment often associated with FHA loans?

• A. Junior Mortgage
• B. Jumbo Loan
• C. Insured Mortgage
• D. Leasehold

Answer: (C)

The type of mortgage that requires a lower down payment and is often associated with FHA loans is an insured mortgage. This type of loan is backed by the Federal Housing Administration (FHA), which allows borrowers to qualify for a loan with a lower down payment, sometimes as low as 3.5%. The purpose of FHA insurance is to protect lenders against potential losses in case of default. Because of this backing, lenders can offer more favorable terms, including lower down payment requirements, making homeownership more accessible to first-time homebuyers and those with lower credit scores. In contrast, the other options do not typically offer the same down payment benefits. A junior mortgage serves as a secondary loan and usually does not have the same protective backing as an insured mortgage. A jumbo loan exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, typically requiring higher down payments due to increased risk. Leasehold arrangements are not mortgage types but rather a form of property tenure where the buyer leases the land rather than owning it outright, which may involve different financial arrangements altogether.

The type of mortgage that requires a lower down payment and is often associated with FHA loans is an insured mortgage. This type of loan is backed by the Federal Housing Administration (FHA), which allows borrowers to qualify for a loan with a lower down payment, sometimes as low as 3.5%. The purpose of FHA insurance is to protect lenders against potential losses in case of default. Because of this backing, lenders can offer more favorable terms, including lower down payment requirements, making homeownership more accessible to first-time homebuyers and those with lower credit scores.

In contrast, the other options do not typically offer the same down payment benefits. A junior mortgage serves as a secondary loan and usually does not have the same protective backing as an insured mortgage. A jumbo loan exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, typically requiring higher down payments due to increased risk. Leasehold arrangements are not mortgage types but rather a form of property tenure where the buyer leases the land rather than owning it outright, which may involve different financial arrangements altogether.