Nationwide Mortgage Licensing System (NMLS) Practice Exam

Which loan type typically has lower closing costs than other loans?

1. Fixed-rate mortgage

2. VA loan

3. Conventional loan

4. Jumbo loan

The correct answer is: VA loan

The VA loan is designed to assist eligible veterans, active-duty service members, and certain members of the National Guard and Reserves in obtaining home financing with significant benefits, one of which is typically lower closing costs. This is primarily due to the various benefits the government provides to veterans to facilitate home ownership. For instance, VA loans do not require a down payment in most cases, thus reducing upfront costs. There are also limitations on certain closing costs, as the lender is not allowed to charge the veteran for specific fees, like the VA funding fee, which can be rolled into the loan amount or waived for certain borrowers with service-related disabilities. These advantages generally make VA loans more accessible and affordable for eligible borrowers compared to other types of loans, which may have higher associated closing costs due to varying lender fees, down payment requirements, and other mandatory fees that can accumulate.