Nationwide Mortgage Licensing System (NMLS) Practice Exam

The maximum term for a FHA loan is:

1. 15 years

2. 30 years

3. 40 years

4. 50 years

The correct answer is: 30 years

The maximum term for an FHA (Federal Housing Administration) loan is indeed 30 years. This limit is set to ensure that borrowers have manageable monthly payments while also providing a long enough repayment period to accommodate the needs of most homebuyers. FHA loans are designed to support access to home ownership, especially for those who might be first-time buyers or have lower credit scores. The choice of a 30-year maximum term aligns with standard mortgage practices in the U.S., where the 30-year fixed-rate mortgage is a popular option among lenders and borrowers. This term allows the borrower to spread the cost of the home over a longer period, resulting in lower monthly payments compared to shorter-term loans. FHA loans with terms longer than 30 years, such as 40 and 50 years, are not typically supported. Although some lenders may offer extended terms, these would not align with FHA's guidelines. The 15-year term option is also viable but serves a different purpose; it generally reflects higher monthly payments due to the shorter repayment period, which appeals to borrowers who can afford to pay down the loan more aggressively. Thus, the 30-year term distinctly serves the primary goal of FHA loans, which is to make home financing accessible for a wider range of