Finance
What is an FHA 203(k) loan?
AA standard FHA purchase loan
BAn FHA loan that combines home purchase and renovation costs into one mortgage✓ Correct
CAn FHA loan for condominiums only
DA refinance loan for FHA-insured properties
Explanation
The FHA 203(k) loan allows buyers to finance both the purchase price and rehabilitation costs in a single mortgage. It is ideal for properties needing significant repairs and is backed by FHA insurance.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
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