Nationwide Mortgage Licensing System (NMLS) Practice Exam

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Prepare for the Nationwide Mortgage Licensing System (NMLS) Exam. Utilize flashcards and multiple choice questions, each with hints and explanations. Ensure your success by getting thoroughly prepared!

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Which type of loans are partially guaranteed?

FHA loans
Jumbo loans
Conventional loans
VA loans

The correct answer is: FHA loans

The correct response identifies FHA loans as being partially guaranteed. The Federal Housing Administration (FHA) insures loans made by approved lenders to borrowers with low to moderate incomes. This insurance acts as a partial guarantee to lenders, enhancing their security in case of borrower default. As a result, lenders are often more willing to provide loans to individuals who might not qualify under conventional financing criteria, promoting homeownership across a broader range of the population. In contrast, while jumbo loans and conventional loans are common types of financing, they do not have the guarantee or insurance backing from government entities. Jumbo loans exceed the conforming loan limits set by the Federal Housing Finance Agency, and conventional loans can be either conforming or non-conforming, typically lacking any government backing. VA loans, while also supported by a government entity, are fully guaranteed, covering the entire loan amount rather than being partially guaranteed.