Which type of loan generally requires a higher down payment?

Which type of loan generally requires a higher down payment?

• A. Fixed-rate mortgage
• B. Conventional mortgage
• C. VA loan
• D. FHA loan

Answer: (B)

A conventional mortgage typically requires a higher down payment compared to other types of loans. Generally, conventional loans are not backed by a government entity and thus carry more stringent requirements regarding creditworthiness and down payment amounts. While it's possible to find conventional loans with lower down payments (like 3% for first-time homebuyers), many lenders will typically look for a 20% down payment to avoid private mortgage insurance (PMI) and mitigate their risk. In contrast, VA loans, which are guaranteed by the Department of Veterans Affairs, often require no down payment for qualified veterans and active-duty service members. FHA loans are designed to help lower-income borrowers and typically require lower down payments, generally around 3.5%, making homeownership more accessible. Fixed-rate mortgages refer to the loan's interest rate structure, which does not inherently dictate the down payment requirement.

A conventional mortgage typically requires a higher down payment compared to other types of loans. Generally, conventional loans are not backed by a government entity and thus carry more stringent requirements regarding creditworthiness and down payment amounts. While it's possible to find conventional loans with lower down payments (like 3% for first-time homebuyers), many lenders will typically look for a 20% down payment to avoid private mortgage insurance (PMI) and mitigate their risk.

In contrast, VA loans, which are guaranteed by the Department of Veterans Affairs, often require no down payment for qualified veterans and active-duty service members. FHA loans are designed to help lower-income borrowers and typically require lower down payments, generally around 3.5%, making homeownership more accessible. Fixed-rate mortgages refer to the loan's interest rate structure, which does not inherently dictate the down payment requirement.