Finance
A USDA-guaranteed loan in Utah offers what advantage to the lender?
AThe USDA pays the borrower's down payment
BThe USDA guarantees a portion of the loan, reducing the lender's risk of loss✓ Correct
CNo documentation is required for approval
DThe interest rate is set at 0% by the USDA
Explanation
USDA guarantees protect the lender by covering a significant portion of the loan amount if the borrower defaults, enabling lenders to offer favorable terms in rural areas with no down payment requirement.
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Key Terms to Know
Discount Points
Prepaid 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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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