What type of loan does NOT require mortgage insurance?

What type of loan does NOT require mortgage insurance?

• A. Conventional loans
• B. FHA loans
• C. VA loans
• D. USDA loans

Answer: (C)

In the context of real estate financing, VA loans are unique in that they do not require mortgage insurance. This is because VA loans are backed by the Department of Veterans Affairs, which guarantees a portion of the loan, allowing lenders to offer these loans without the added risk that typically necessitates mortgage insurance. This helps veterans and active-duty service members obtain favorable loan terms, making homeownership more accessible. In contrast, conventional loans typically require mortgage insurance if the down payment is less than 20% of the property's purchase price, as this reduces the lender's risk. FHA loans, insured by the Federal Housing Administration, always involve both an upfront and monthly mortgage insurance premium regardless of the down payment amount. USDA loans offer a guarantee on loans made for rural properties and usually require mortgage insurance as well, but at lower rates compared to other types of loans. Therefore, the absence of mortgage insurance requirements makes VA loans a particularly attractive option for eligible borrowers.

In the context of real estate financing, VA loans are unique in that they do not require mortgage insurance. This is because VA loans are backed by the Department of Veterans Affairs, which guarantees a portion of the loan, allowing lenders to offer these loans without the added risk that typically necessitates mortgage insurance. This helps veterans and active-duty service members obtain favorable loan terms, making homeownership more accessible.

In contrast, conventional loans typically require mortgage insurance if the down payment is less than 20% of the property's purchase price, as this reduces the lender's risk. FHA loans, insured by the Federal Housing Administration, always involve both an upfront and monthly mortgage insurance premium regardless of the down payment amount. USDA loans offer a guarantee on loans made for rural properties and usually require mortgage insurance as well, but at lower rates compared to other types of loans. Therefore, the absence of mortgage insurance requirements makes VA loans a particularly attractive option for eligible borrowers.