Alabama Real Estate Practice Exam

What is the size of the down payment needed for an FHA-insured mortgage?

1. More than 20%

2. Exactly 20%

3. Less than 20%

4. No down payment required

The correct answer is: Less than 20%

An FHA-insured mortgage allows for a lower credit score and higher debt-to-income ratio than a conventional mortgage. However, borrowers are still required to make a down payment, unlike VA or USDA loans. A down payment of less than 20% is typically required for FHA-insured mortgages. Option A, with more than 20%, would make this type of loan more similar to a conventional mortgage. Option B, with exactly 20%, is not the correct answer as a down payment of exactly 20% is usually associated with conventional loans. Option D, with no down payment required, is incorrect as stated earlier, FHA-insured mortgages do require a down payment. Therefore, the correct answer is C - less than 20%.