California Real Estate Practice Exam

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What is true about the FHA?

  1. It lends money directly

  2. It does not lend money

  3. It underwrites all mortgage loans

  4. It only insures loans over $500,000

The correct answer is: It does not lend money

FHA, or Federal Housing Administration, does not actually lend money directly to borrowers. Instead, it provides insurance to lenders, which makes it easier for borrowers to obtain home loans since the lenders are protected against defaults. Option A is incorrect because FHA does not directly lend money. Option C is incorrect because it only underwrites certain types of mortgage loans, not all of them. Option D is incorrect because FHA insures loans of varying amounts, not just those over $500,000.

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