Alabama Real Estate Practice Exam

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Master your Alabama real estate exam with our comprehensive practice test. Tailored feedback, expert tips, and up-to-date questions to ensure your success!

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What type of mortgage protects the lender on loans over 80% of the selling price?

Conforming mortgage
VA-insured
Conventional Mortgage
Private Mortgage Insurance

The correct answer is: Private Mortgage Insurance

A conforming mortgage is a loan that meets the size and other requirements set by government-sponsored enterprises like Fannie Mae and Freddie Mac. This type of mortgage has nothing to do with protecting the lender on loans over 80% of the selling price. VA-insured mortgages are only available to qualified veterans and active-duty military members. These loans are guaranteed by the Department of Veterans Affairs and also do not protect the lender on loans over 80% of the selling price. A conventional mortgage is a loan that is not backed by the government. While this type of mortgage may require a down payment of at least 20%, it does not necessarily protect the lender on loans over 80% of the selling price. Private Mortgage Insurance (PMI) is a type of insurance that protects the lender in case the borrower defaults on the loan. It is typically required for conventional loans with a down