Affiliate Broker Tennessee (TN PSI) National Practice Exam `

What is a true statement regarding FHA loans for individuals with a previous bankruptcy?

1. A minimum down payment of 5% is required.

2. A minimum down payment of 3.5% is required.

3. A minimum credit score of 700 is mandated.

4. A cosigner is mandatory for all transactions.

The correct answer is: A minimum down payment of 3.5% is required.

FHA loans are designed to assist borrowers with less-than-perfect credit histories, making them an attractive option for individuals who have previously faced financial difficulties, such as bankruptcy. One of the key benefits of FHA loans is their relatively low down payment requirement. In the case of individuals who have a history of bankruptcy, FHA guidelines stipulate that a minimum down payment of 3.5% is required. This lower down payment threshold can provide greater accessibility to homeownership for those looking to rebuild their financial standing after experiencing bankruptcy. This is particularly significant for borrowers who have emerged from bankruptcy and are looking to secure financing. The combination of a forgiving down payment requirement and a focus on the borrower's current financial situation rather than solely on past credit issues allows FHA loans to cater to those in such circumstances. Other options incorrectly state higher down payment requirements or impose unnecessary credit score mandates, which do not align with FHA's inclusive approach to lending.