Finance
Interest rates on FHA loans compared to conventional loans are generally:
ASignificantly higher because FHA borrowers are higher risk
BCompetitive with or slightly lower than conventional rates because the loans are government-backed✓ Correct
CFixed by law at the prime rate
DAlways adjustable, never fixed
Explanation
Because FHA loans are insured by the federal government, lenders face less risk. This allows FHA rates to be competitive with — and sometimes slightly lower than — conventional rates, despite the lower down payment requirements.
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