What is the primary function of the Federal Housing Administration (FHA) in mortgage lending?
Correct Answer
B) Insures approved lenders against losses on qualifying mortgage loans
The Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), does not make loans directly. Instead, it insures FHA-approved lenders against losses if a borrower defaults. This insurance allows lenders to offer loans with lower down payments (as low as 3.5%) and more flexible qualifying criteria, making homeownership more accessible to first-time and lower-income buyers in Delaware and nationwide.
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Related Topics & Key Terms
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Related Concepts
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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%.
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