Two buyers cannot afford down payment on 3-unit residence. Government program requires mortgage default insurance, permits 3.5% down payment. They used:

A is incorrect because conventional loans with private mortgage insurance typically require higher down payments (usually 5-20%) and don't offer the 3.5% option for multi-unit properties. Private mortgage insurance is different from government-backed insurance.

B is incorrect because FHA does not provide direct loans to borrowers. FHA insures loans that are originated by approved lenders, so there's no such thing as a 'direct FHA loan.'

C is incorrect because VA loans do not require mortgage insurance and are only available to eligible veterans and active-duty service members. Additionally, VA loans don't typically apply to multi-unit investment properties.