A house has been appraised at $85,000. A buyer offers and a seller accepts the appraised value for the house. Under which of the following loan programs would the buyer, if qualified, be most likely to obtain a 100% loan

Rationale

VA-guaranteed loan

VA-guaranteed loans are specifically designed for eligible veterans and active-duty service members, allowing them to finance a home purchase with no down payment, hence facilitating a 100% loan. This program is backed by the Department of Veterans Affairs, which provides guarantees to lenders, minimizing the risk and enabling favorable borrowing terms.

A (VA-guaranteed loan) CORRECT

This loan program allows qualified veterans to purchase homes without a down payment, effectively enabling a 100% loan. The guarantee provided by the VA reduces lender risk, making it an attractive option for eligible buyers seeking to finance the entire appraised value of a home.

B (FHA-insured loan) YOUR ANSWER

While FHA-insured loans are popular for low down payments, they typically require a minimum down payment of 3.5% of the purchase price. This means that the buyer would need to contribute some funds upfront, which does not meet the criteria for a 100% loan.

C (conventional loan insured by private mortgage insurance) YOUR ANSWER

Conventional loans can require as little as 3% down payment, but they are not designed for 100% financing without additional insurance. Private mortgage insurance (PMI) is often necessary when the down payment is less than 20%, which also makes this option unsuitable for those seeking a full loan amount without any upfront payment.

D (conventional uninsured loan) YOUR ANSWER

A conventional uninsured loan would not typically allow for 100% financing. Lenders generally require a down payment on conventional loans to mitigate their risk, meaning the buyer would have to provide some funds upfront, making it incompatible with the requirement for a 100% loan.

Conclusion

For buyers looking to obtain a loan covering the full appraised value of a home, the VA-guaranteed loan stands out as the most viable option, allowing 100% financing for eligible veterans. Other loan types, such as FHA-insured and conventional loans, necessitate down payments, preventing them from meeting the requirement for complete financing. The VA program thus uniquely supports qualified individuals in purchasing homes without upfront costs.

A house has been appraised at $85,000. A buyer offers and a seller accepts the appraised value for the house. Under which of the following loan programs would the buyer, if qualified, be most likely to obtain a 100% loan

VA-guaranteed loan

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