Lena is buying a home for $280,000 with FHA financing. Assuming the minimum required 3.5% down payment applies, how much cash must she contribute for the down payment?
Correct Answer
C) $9,800
The correct down payment is $9,800. Formula: Down payment = Purchase price × 3.5% = $280,000 × 0.035 = $9,800. FHA is known for allowing qualifying borrowers to purchase with a minimum 3.5% investment, so that percentage is the correct base for the calculation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
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