Housing Counselor Certification (HUD) Practice Exam

What type of mortgage is a potential homebuyer with minimal savings and a low credit score most likely to qualify for?

1. FHA loan

2. Conventional mortgage

3. VA loan

4. USDA loan

The correct answer is: USDA loan

A potential homebuyer with minimal savings and a low credit score is most likely to qualify for an FHA loan. FHA loans are specifically designed to help individuals with lower credit scores and limited funds for a down payment access home financing. The Federal Housing Administration insures these loans, allowing lenders to offer them with more lenient credit score and down payment requirements. In contrast, conventional mortgages typically necessitate higher credit scores and larger down payments, making them less accessible for buyers with minimal savings and low credit. VA loans are available to veterans and service members and often come with favorable terms, but they still usually require a good credit score. USDA loans cater to low-income buyers in rural areas but have income restrictions and do not necessarily focus on individuals with low credit scores; they require a satisfactory credit history. Thus, the combination of leniency in credit score requirements and the allowance for lower down payments makes FHA loans the most suitable option for the stated circumstances.