A first-time homebuyer has a credit score of 620 and limited savings for a down payment. The buyer's lender recommends an FHA loan. What is the minimum down payment required for an FHA loan with a credit score of at least 580?
Correct Answer
B) 3.5 percent of the purchase price
FHA loans require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or higher. Borrowers with scores between 500 and 579 must put down at least 10 percent.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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