Nationwide Mortgage Licensing System (NMLS) Practice Exam

VA loans are typically described as:

1. Partially guaranteed

2. Insured

3. Exempt

4. Entitled

The correct answer is: Partially guaranteed

VA loans are described as partially guaranteed because they are backed by the U.S. Department of Veterans Affairs (VA) to a certain extent. This guarantee reduces the lender's risk by ensuring that a portion of the loan amount will be repaid if the borrower defaults. This partial guarantee allows lenders to offer favorable terms, such as no down payment and lower interest rates, which make homeownership more accessible for eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. The other options do not accurately describe the nature of a VA loan. VA loans are not insured in the same way that FHA loans are, meaning they do not have mortgage insurance premiums that borrowers must pay. They are also not exempt, as they have specific eligibility criteria that must be met. Finally, the term "entitled" relates to the eligibility and benefit level of veterans but does not describe the guarantee structure of the loan itself. Thus, being partially guaranteed is the most precise and accurate description of VA loans.