Financing exam concept
Conventional vs. FHA vs. VA vs. USDA loans
Four loan programs can help buy the same home, but they do not use the same eligibility rules or charges. For an exam question, start with the lender’s protection. Then check the borrower, property, required cash and ongoing cost. “Government-backed” does not mean the government pays the borrower’s bill.
Last reviewed:
The short answer
Conventional loans are outside specific government insurance or guaranty programs. FHA insures qualifying mortgages. VA and USDA’s guaranteed housing program back qualifying private-lender loans under different eligibility rules. FHA can permit 3.5% down for maximum-financing borrowers; VA and USDA guaranteed loans can permit no down payment when their conditions are met. None of those features guarantees approval or zero cash to close.
Reviewed October 27, 2026. PSI places conventional and government loans in national IV.B within Financing, which has 10 of the 100 scored national broker questions across all its subjects. There is no separate ten-question allocation for these four programs. These are original teaching questions, not recalled exam items or a validated readiness score.
Compare the loan in five steps
- Identify the program and lender. A conventional mortgage is not FHA-insured or VA- or USDA-guaranteed. A conforming conventional loan meets the applicable Fannie Mae or Freddie Mac acquisition standards, including its local limit. Above-limit jumbo loans are nonconforming; a lender keeping a loan in its portfolio does not, by itself, prove it fails conforming standards.
- Check eligibility before comparing a headline down payment. Ordinary FHA purchase financing is for a qualifying principal residence, not an unrestricted investment-property program or a first-time-buyer-only benefit. VA purchase eligibility requires qualifying service or survivor status, entitlement and lender approval. USDA guaranteed financing also tests household income and the property’s eligible rural location. Eligibility is a starting point, not an underwriting decision.
- Separate the down payment from cash to close. FHA maximum financing can require a 3.5% minimum investment based on adjusted value. VA full entitlement can support no down payment without a VA loan limit, but lender approval and supported value still matter. USDA guaranteed financing can cover 100% for eligible transactions. Prepaid items, closing costs, escrow deposits, fees and a price-over-value gap can still require cash.
- Name the charge correctly. Conventional PMI is private mortgage insurance and is often required with a down payment below 20%, subject to the actual product. FHA has upfront and annual MIP. VA purchase loans have no monthly mortgage insurance, but a funding fee generally applies unless exempt. USDA guaranteed loans have upfront and annual guarantee fees. A fee and a down payment solve different problems.
- Apply the October USDA fee year correctly. October 2026 falls in fiscal year 2027, which runs October 1, 2026 through September 30, 2027. USDA’s notice sets a 1.00% upfront guarantee fee and a 0.35% annual fee for guaranteed purchase and refinance loans. Annual charges use the program’s scheduled-balance method; do not treat the percentage as a fixed original-balance charge forever or copy the FHA fee-financing formula.
- Use current figures for the right program, location and date. The 2026 one-unit conventional conforming baseline is $832,750; the general high-cost ceiling is $1,249,125. FHA’s 2026 one-unit floor is $541,287 and its general ceiling is $1,249,125, with county and special-area rules. A shared ceiling does not make FHA and conventional loans the same product. Different unit counts and dates can change the answer.
- Check an assumption’s actual approval and entitlement outcome. VA permits an approved assumption by a qualified non-Veteran as well as a qualified Veteran. VA’s assumption notice says an approved assumption releases the departing borrower from mortgage-payment responsibility. That does not itself restore the Veteran’s entitlement. Substitution requires a qualifying Veteran with sufficient entitlement and the required process. Merely taking over payments informally does not establish an approved assumption.
- Compare actual offers on consistent assumptions. Read the Loan Estimate for rate, term, points, insurance, program charges, projected payments and cash to close. Ask what is locked and which figures can change. A smaller down payment does not establish the lowest total cost. Keep the appraisal, inspection, assumption terms and lender’s approval decision separate from the program label.
- Distinguish publication from effective date. HUD announced additional credit-score models on October 8, 2026, but the new policy applies to case numbers assigned on or after January 1, 2027. It does not make that future model policy operative for an October case. HUD says its minimum credit-score and LTV thresholds remain unchanged. A draft property-standard proposal is likewise not a replacement for current policy.
| Program | Backing | Key eligibility check | Charges to recognize |
|---|---|---|---|
| Conventional | No specific federal program insurance or guaranty | Lender and product requirements; conforming standards if applicable | PMI can apply, depending on product and equity |
| FHA | Federal mortgage insurance | Qualifying borrower, principal residence and program property rules | Upfront and annual MIP |
| VA purchase | VA guaranty of a private-lender loan | Service or survivor eligibility, entitlement and underwriting | Funding fee unless exempt; no monthly mortgage insurance |
| USDA guaranteed | 90% loan-note guaranty to the lender | Eligible rural address, household income, occupancy and repayment | Upfront and annual guarantee fees |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Conventional vs. conforming | Conventional is the broad category without specific government program backing. Conforming adds enterprise acquisition requirements, including the applicable limit. | A loan can be conventional without being conforming. |
| FHA insurance vs. VA guaranty | FHA insures qualifying lender mortgages. VA guarantees part of qualifying loans for eligible borrowers; the private lender still underwrites the purchase loan. | Identify the form of backing and borrower eligibility. |
| USDA guaranteed vs. USDA direct | Guaranteed loans use approved private lenders. Section 502 Direct is a separate USDA financing program for low- and very-low-income applicants, with its own eligibility and possible payment assistance. | Do not quote a Direct program rate as the guaranteed program rate. |
| 90% guaranty vs. 10% down payment | USDA’s 90% loan-note guaranty describes protection for the lender. It is compatible with eligible 100% borrower financing. | The guaranty percentage is not a borrower down-payment formula. |
| Full VA entitlement vs. remaining entitlement | Full entitlement has no VA loan limit. Previously used entitlement that has not been restored can make the county limit relevant to the available guaranty and cash requirement. | A county figure is not a universal cap on every VA borrower. |
| PMI vs. FHA MIP | Private mortgage insurance and FHA insurance have different rules. A conventional PMI cancellation rule is not automatically an FHA cancellation rule. | Do not promise FHA MIP disappears at 20% equity. |
| Down payment vs. cash to close | Down payment is the purchase investment. Cash to close also reflects other charges, deposits, credits and adjustments. | Zero down can still require cash. |
| Loan limit vs. approval | The applicable limit controls particular program or enterprise treatment. Credit, income, debt, assets, property and lender requirements still determine approval. | Being below a limit does not qualify the borrower. |
| Appraisal vs. inspection | A program appraisal supports value and applicable property standards. It does not replace an independent inspection for the buyer. | An appraisal is not a condition warranty. |
| VA assumption release vs. entitlement substitution | An approved assumption releases the departing borrower from mortgage-payment responsibility under VA’s notice. Entitlement does not automatically become available again; substitution is a separate qualifying process. | Do not demand a new separate liability release after an already approved assumption, or assume release restores entitlement. |
Work through the facts
Classify the loan, not the lender’s marketing
A private lender makes a mortgage that meets the applicable 2026 local limit and Fannie Mae acquisition standards. No government insurance or guaranty applies.
- No program backing makes it conventional.
- The supplied enterprise standards make it conforming.
Answer: Conventional conforming. The fact that the lender is private would not, by itself, rule out FHA, VA or USDA guaranteed lending.
A repeat buyer considers FHA
A buyer who owned a home before seeks an ordinary qualifying FHA principal-residence purchase. No other disqualifying fact is supplied.
- Previous ownership alone does not make FHA unavailable.
- Underwriting, occupancy, property and other program conditions remain.
Answer: Do not reject FHA merely because the buyer is not buying a first home.
Calculate the stated FHA minimum investment
The question supplies a $300,000 adjusted value and an eligible ordinary FHA purchase requiring the 3.5% minimum investment. Ignore other adjustments.
- $300,000 × 0.035 = $10,500.
- The remaining $289,500 is the base financing before any financed upfront MIP.
Answer: $10,500 minimum investment on the stated facts. This is not the total cash to close or the final note balance.
No-down VA financing meets a value gap
Assume a qualifying borrower with full entitlement, a $425,000 price and $410,000 supported value. The price does not change, no other resolution applies, and the lender will not finance the $15,000 gap.
- $425,000 − $410,000 = $15,000.
- The program’s no-down feature does not finance this stipulated unsupported price difference.
Answer: The buyer must address the $15,000 gap, plus any other required cash. This example is not a lender approval or a calculation of financed funding fees.
USDA income eligibility is only one test
A household meets the guaranteed program’s income test, but the proposed address is outside the eligible area and no exception is supplied.
- The income test and property-location test are separate.
- Passing one does not override the failed location fact.
Answer: Do not treat the property as eligible solely because the household’s income qualifies. Check the actual address and current program determination.
A 2026 limit does not approve the borrower
An ordinary one-unit loan amount is below the $832,750 baseline, but the file does not meet the applicable debt and underwriting requirements.
- A conforming amount is only one requirement.
- Approval depends on the whole applicable file and product standards.
Answer: The dollar limit alone does not establish conforming eligibility or borrower approval.
Zero down still leaves closing funds
An eligible no-down purchase has $6,000 in stipulated closing charges and prepaid items after all credits and deposits. No other adjustment or permitted financing covers them.
- The purchase down payment is zero.
- The remaining charges are still payable.
Answer: The stated cash requirement is $6,000. “Zero down” is not a promise of zero cash to close.
Read two estimates rather than one slogan
A buyer can qualify for more than one program. One offer has a lower advertised rate but different points, program charges and cash requirements.
- Compare offers using consistent price, term and down-payment assumptions.
- Read the Loan Estimates and lock terms before deciding which cost matters to this borrower.
Answer: The headline rate alone cannot establish the better offer. A program name is not a universal cost ranking.
Compute a VA fee on the correct base
Assume an ordinary first-use VA purchase, a nonexempt borrower, less than 5% down and a $300,000 base loan before the funding fee. The stated fee is financed; no other change applies.
- The applicable fee is 2.15% of $300,000: $6,450.
- Adding that financed fee gives $306,450. Do not charge the fee again on itself.
Answer: The funding fee is $6,450 and the resulting note amount is $306,450 on these facts. Other loan types, use histories, down payments and exemption facts can change the fee.
An approved assumption does not free entitlement automatically
A credit-qualified non-Veteran completes a VA-approved assumption of a current loan. No substitution of entitlement or other restoration event occurs.
- VA allows a qualifying non-Veteran to assume.
- Under VA’s notice, the approved assumption releases the departing borrower from mortgage-payment responsibility, while entitlement remains tied to the loan absent the required separate restoration event.
Answer: Separate liability release from entitlement availability. Do not say the departing borrower remains liable merely because the assuming buyer is not a Veteran, or that the approval automatically restores entitlement.
Mistakes to avoid
- “Conventional means conforming.” Conforming is a subset; conventional loans can be nonconforming.
- “Every portfolio loan is nonconforming.” Retention by a lender does not itself establish failure of enterprise standards.
- “FHA lends ordinary purchase money directly.” The participating lender makes the insured mortgage.
- “FHA is only for first-time buyers.” Prior ownership alone does not bar an otherwise qualifying FHA purchase.
- “A qualifying score means automatic approval.” Program thresholds, lender requirements and the complete file still matter.
- “Every VA loan has a county borrowing cap.” Full entitlement has no VA loan limit, while lender and value constraints remain.
- “USDA’s 90% guaranty means 10% down.” The guaranty protects the lender; eligible financing can reach 100%.
- “A government appraisal replaces inspection.” It does not provide the buyer’s independent condition assessment.
- “A low down payment proves the lowest total cost.” Compare actual payments, charges, cash and terms.
- “October 2026 uses USDA fiscal year 2026 fees.” October 1 begins fiscal year 2027. Label the fee year and date range.
- “Any VA payment takeover restores entitlement.” An informal takeover is not an approved assumption; even an approved assumption does not automatically restore entitlement.
- “A policy announced in October applies to every October loan.” Read its effective-date trigger. The October FHA credit-model announcement starts with January 1, 2027 case assignments.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. Which loan has no specific FHA, VA or USDA program backing?
- Conventional
- FHA-insured
- VA-guaranteed
- USDA-guaranteed
Show answer and explanation
Answer: A. Conventional
Conventional identifies the absence of that specific government insurance or guaranty. Conforming adds enterprise standards.
2. Which feature belongs to an ordinary qualifying FHA purchase?
- A first-time-buyer requirement in every case
- Possible 3.5% minimum investment plus upfront and annual MIP
- An unrestricted investment-only purpose
- No mortgage insurance ever
Show answer and explanation
Answer: B. Possible 3.5% minimum investment plus upfront and annual MIP
Maximum-financing borrowers can qualify for the stated minimum. MIP, underwriting and occupancy still matter.
3. Which fact is central to VA purchase eligibility?
- Being a farmer
- Buying in a USDA rural area
- Qualifying service or survivor status and entitlement
- Being a first-time buyer only
Show answer and explanation
Answer: C. Qualifying service or survivor status and entitlement
VA eligibility and entitlement are different from the USDA location and income tests. A COE does not itself approve the loan.
4. Which pair is central to USDA guaranteed housing eligibility?
- First-time status and a government inspection warranty
- Investor status and luxury acreage
- A 10% mandatory down payment and no income test
- Eligible rural location and household income
Show answer and explanation
Answer: D. Eligible rural location and household income
The property and household tests both matter, along with occupancy, repayment and the other applicable requirements.
5. What does the 2026 $832,750 one-unit conforming baseline establish by itself?
- A program amount standard, not borrower approval
- A universal VA borrowing cap
- Approval for every borrower below it
- The FHA limit for every county and unit count
Show answer and explanation
Answer: A. A program amount standard, not borrower approval
Enterprise eligibility and underwriting require more than amount. VA full entitlement does not use a universal VA loan cap.
6. A lender retains a loan in its portfolio. Which statement follows from that fact alone?
- The borrower has no repayment duty
- It must be FHA-insured
- It must be illegal
- Retention alone does not prove nonconforming status
Show answer and explanation
Answer: D. Retention alone does not prove nonconforming status
Portfolio describes retention. You still need the acquisition standards and loan facts to classify conforming status.
7. Who ordinarily advances funds on an FHA purchase mortgage?
- The participating lender
- The county assessor
- PSI
- The buyer’s home inspector
Show answer and explanation
Answer: A. The participating lender
FHA provides insurance under its program; it is not the ordinary purchase lender in this comparison.
8. A prior homeowner otherwise qualifies for FHA principal-residence financing. What does prior ownership alone do?
- It guarantees approval
- It prohibits every FHA loan
- It does not by itself bar FHA eligibility
- It always requires cash purchase
Show answer and explanation
Answer: C. It does not by itself bar FHA eligibility
FHA is not restricted to first-time buyers. Other borrower, property and transaction requirements remain.
9. An eligible FHA purchase has a $300,000 adjusted value and a stipulated 3.5% investment. What is that investment?
- $10,500
- $30,000
- $289,500
- $3,500
Show answer and explanation
Answer: A. $10,500
Multiply $300,000 by 0.035. The result is not the full cash to close or the final note including financed MIP.
10. Does a VA Certificate of Eligibility guarantee lender approval?
- Yes, because it replaces appraisal
- Yes, for any amount
- No; underwriting, entitlement use, property and other requirements remain
- Yes, if the buyer has no savings
Show answer and explanation
Answer: C. No; underwriting, entitlement use, property and other requirements remain
The certificate addresses eligibility and entitlement. It is not a completed credit decision or a value determination.
11. What is correct for a borrower with full VA entitlement?
- Every loan is capped at the one-unit county figure
- All closing costs disappear
- There is no VA loan limit, but lender approval and value still matter
- All prices are fully financed regardless of value
Show answer and explanation
Answer: C. There is no VA loan limit, but lender approval and value still matter
No VA loan limit does not mean unlimited approval or financing of an unsupported purchase price.
12. On the expressly stated $425,000 price and $410,000 supported-value example, what gap remains?
- $425,000
- $15,000
- $25,000
- $410,000
Show answer and explanation
Answer: B. $15,000
The difference is $15,000. The exercise excludes another resolution and stipulates that the lender will not finance that gap.
13. Which description correctly identifies the ordinary VA purchase-loan mortgage-insurance feature?
- All costs are always zero
- No monthly mortgage insurance; a funding fee can still apply
- The lender cannot charge any permitted cost
- Monthly FHA MIP is mandatory
Show answer and explanation
Answer: B. No monthly mortgage insurance; a funding fee can still apply
The absence of monthly mortgage insurance does not remove the funding fee unless exempt, or erase other allowed charges.
14. What does USDA’s 90% loan-note guaranty describe?
- A mandatory 10% borrower down payment
- Protection for the lender under program rules
- A borrower’s automatic debt forgiveness
- The property’s appreciation rate
Show answer and explanation
Answer: B. Protection for the lender under program rules
Do not subtract the guaranty from 100% to invent a down payment. Eligible guaranteed financing can reach 100%.
15. Income qualifies for USDA guaranteed financing, but the address is ineligible with no exception. Which is correct?
- A VA certificate cures it
- Occupation as a farmer cures it
- Income overrides the address
- The property-location problem remains
Show answer and explanation
Answer: D. The property-location problem remains
USDA checks household and property eligibility separately. One favorable fact cannot silently supply another missing requirement.
16. Which statement distinguishes USDA guaranteed from Section 502 Direct?
- They always have the same quoted interest rate
- Both require every borrower to farm
- Guaranteed uses approved lenders; Direct is a separate agency financing program
- Neither has eligibility rules
Show answer and explanation
Answer: C. Guaranteed uses approved lenders; Direct is a separate agency financing program
The programs have distinct applicant and funding rules. A published Direct rate is not a guaranteed-program lender quote.
17. A qualifying zero-down purchase still has $6,000 due after all credits, deposits and permitted financing. How much is due under those facts?
- $0 automatically
- $600
- $60,000
- $6,000
Show answer and explanation
Answer: D. $6,000
A zero purchase down payment does not eliminate the other stipulated charges. Read cash to close separately.
18. Which document supports comparing actual mortgage offers on consistent assumptions?
- The buyer’s moving receipt
- An exam completion certificate
- The Loan Estimate
- A social-media slogan
Show answer and explanation
Answer: C. The Loan Estimate
Compare rates, points, program charges, projected payments, cash and lock assumptions, not just the advertised rate.
19. What does an FHA or VA appraisal do in this comparison?
- Replaces the buyer’s inspection
- Supports value and applicable program property standards
- Approves every borrower’s credit
- Guarantees no hidden defect
Show answer and explanation
Answer: B. Supports value and applicable program property standards
The buyer’s independent condition investigation remains a separate task. An appraisal is not a condition warranty.
20. Which general cost conclusion is justified without the borrower’s actual offers?
- Conventional is always cheapest
- FHA is always cheapest
- VA is always cheapest
- No program is automatically cheapest for every qualified borrower
Show answer and explanation
Answer: D. No program is automatically cheapest for every qualified borrower
Charges, rate, equity, term and borrower circumstances differ. Use comparable current offers to evaluate cost.
21. Which USDA guaranteed fee period includes October 2026?
- Calendar year 2025 only
- Fiscal year 2026 through December 31, 2026
- No fee year applies
- Fiscal year 2027, October 1, 2026 through September 30, 2027
Show answer and explanation
Answer: D. Fiscal year 2027, October 1, 2026 through September 30, 2027
The official FY2027 notice sets 1.00% upfront and 0.35% annual fees. A fiscal year is not the same as a calendar year.
22. The stated first-use, nonexempt VA purchase has less than 5% down and a $300,000 pre-fee loan. What is the 2.15% funding fee?
- $6,450
- $9,900
- $3,000
- $306,450
Show answer and explanation
Answer: A. $6,450
Multiply the pre-fee loan by 0.0215. If the stated fee is financed without another adjustment, the note becomes $306,450; that total is not the fee.
23. A qualified non-Veteran completes a VA-approved assumption, with no entitlement substitution or other restoration event. Which statement fits VA’s notice?
- Entitlement is automatically restored
- The old borrower remains liable in every approved assumption
- The departing borrower is released from payment responsibility, but entitlement remains tied
- Approval is impossible solely because the buyer is not a Veteran
Show answer and explanation
Answer: C. The departing borrower is released from payment responsibility, but entitlement remains tied
The notice distinguishes approved-assumption release from substitution and restoration. Informal payment takeover is a different fact.
24. HUD’s October 8, 2026 credit-model announcement applies to case numbers assigned on or after January 1, 2027. What follows for an October 2026 case?
- The lender can ignore all credit standards
- The announcement alone does not make the future policy effective for that case
- The future model policy is already mandatory
- Publication eliminates every score threshold
Show answer and explanation
Answer: B. The announcement alone does not make the future policy effective for that case
Use the actual case-assignment trigger. HUD says its minimum credit-score and LTV thresholds remain unchanged; an announcement date is not its effective date.
Common questions
What is the main difference between conventional, FHA, VA and USDA loans?
Start with the program backing and eligibility. Conventional financing has no specific federal insurance or guaranty. FHA insures qualifying lender mortgages. VA purchase financing uses a guaranty tied to service eligibility and entitlement. USDA guaranteed housing combines a lender guaranty with eligible rural property and household-income rules. Approval still depends on the complete applicable requirements.
Are all conventional loans conforming?
No. Conforming conventional loans meet applicable enterprise acquisition requirements, including the local amount limit. Jumbo loans exceed that limit. Other loans can fail acquisition standards for other reasons. A lender keeping a mortgage in its portfolio does not, without more facts, establish nonconforming status.
How much down payment does FHA require?
For an ordinary eligible purchase receiving maximum financing, the minimum investment can be 3.5% of adjusted value. A minimum decision credit score of at least 580 supports maximum financing under FHA’s baseline; 500 through 579 is limited to 90% LTV. Those are program rules, not a promise that every lender approves those scores. Nontraditional-credit underwriting has separate requirements, so “no score always means no FHA” is also too broad.
Is FHA only for first-time buyers?
No. A repeat buyer can qualify. The ordinary principal-residence, underwriting and property requirements still apply. FHA’s popularity among first-time buyers is not a rule limiting it to them.
What insurance charges apply to an ordinary FHA purchase?
The standard upfront MIP is 1.75% of the base loan amount. Annual MIP varies with the applicable loan amount, term and original LTV; do not make one annual rate universal. These are different from conventional PMI. Special FHA products and older refinance categories have exceptions, so use the rule for the actual transaction.
Does FHA MIP automatically disappear at 20% equity?
No. For the ordinary post-June 3, 2013 case-number rules, duration uses original base LTV excluding financed upfront MIP. At 90% or less, annual MIP lasts until the term ends or 11 years, whichever comes first. Above 90%, it lasts until the term ends or 30 years, whichever comes first. A conventional PMI cancellation threshold is not an FHA cancellation rule.
Does VA have a loan limit in 2026?
A borrower with full entitlement has no VA loan limit. The lender still evaluates the file and supported value. With entitlement still tied to another loan, the applicable one-unit county figure can affect the remaining guaranty and down-payment analysis, even when the property has more units. Do not turn “no VA limit” into unlimited financing or a guarantee of approval.
Does a VA loan have mortgage insurance?
An ordinary VA purchase loan has no monthly mortgage insurance. A funding fee generally applies unless the borrower qualifies for an exemption. Service-connected compensation and other qualifying situations can establish exemption under VA’s rules; have the actual status verified. No monthly insurance does not mean no program charge or closing costs.
Does no down payment mean no money at closing?
No. Separately check closing charges, prepaids, escrow deposits, credits, deposits already paid, permissible financing and any price-over-value gap. Some charges can be covered by permitted credits or financing, but the program name alone does not prove that they have been covered.
Who qualifies for USDA guaranteed housing?
The household and property must meet the program’s income, eligible rural location, occupancy and repayment requirements. Being a farmer is not the defining test. USDA describes no agency minimum credit-score requirement, but that is not a promise that every participating lender has no credit standards or that every applicant qualifies.
What is the difference between USDA guaranteed and direct loans?
Guaranteed loans are made through approved lenders with USDA backing. Section 502 Direct is separate agency financing for low- and very-low-income applicants, with its own limits and possible payment assistance. Do not transfer a Direct interest rate, subsidy or repayment term to a guaranteed loan quote.
What are the 2026 conventional and FHA one-unit limits?
The conventional conforming baseline is $832,750 and the general high-cost ceiling is $1,249,125. FHA’s general one-unit floor is $541,287 and ceiling $1,249,125. Check the county, unit count and applicable program date; special areas have separate treatment. These figures are program standards, not borrower approval amounts.
Does a government appraisal replace a home inspection?
No. Appraisal and program property requirements serve a different purpose from the buyer’s inspection. Neither the FHA nor VA appraisal is a warranty that the house has no defects. Investigate condition and use the actual purchase protections rather than assuming the program has done that work for the buyer.
Which loan is best for the real estate exam or for a buyer?
For an exam, identify the supplied borrower, property, backing and cost facts before choosing the program. For an actual borrower, compare current offers and qualified lending advice. There is no universal winner. These original practice results show which concepts to revisit; they do not predict an official score or establish personal mortgage eligibility.
What USDA guaranteed fees apply in October 2026?
The fiscal year 2027 notice sets 1.00% upfront and 0.35% annual fees for purchase and refinance loans, covering October 1, 2026 through September 30, 2027. The annual fee uses USDA’s scheduled-balance method. These are guaranteed-program charges, not Direct loan terms or a promise of a particular lender rate. The notice’s anticipated start-of-year funding gap does not establish the actual funding status of a loan on today’s date.
What is the current VA purchase funding fee?
For a nonexempt ordinary purchase with less than 5% down, VA lists 2.15% for first use and 3.3% for subsequent use. At least 5% but less than 10% down uses 1.5%; at least 10% uses 1.25%. Apply the correct loan type, history and exemption rules before using that table. The fee can be financed. Ordinary purchase closing costs are not all automatically financeable because the funding fee is.
Can a non-Veteran assume a VA loan, and what happens to entitlement?
A qualified non-Veteran can complete an approved assumption. VA’s notice says the approved assumption releases the departing borrower from mortgage-payment responsibility. Entitlement can remain tied to that loan. A qualifying Veteran’s substitution of entitlement is a different process with its own conditions; do not equate approval with restored entitlement. An informal promise to make payments is not approval. Check the documents and the actual VA determination.
Did October 2026 change the FHA credit-score rules immediately?
HUD’s October 8 announcement adds future credit-model options for case numbers assigned on or after January 1, 2027. Its stated minimum credit-score and LTV thresholds remain unchanged. Do not apply that future model policy to an October case merely because it was announced in October. Similarly, a published draft property-standard proposal is not final operative policy.
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Official sources and scope
Reviewed through October 27, 2026. Current FHFA and HUD limits override older dollar figures still visible in some consumer explainers. Calendar-year loan limits, fiscal-year USDA charges and future-effective announcements are different clocks. Eligibility is not approval; examples state their assumptions and do not quote a private loan.
- PSI June 24, 2026 broker outline: Financing
- CFPB: conventional loans
- FHFA: 2026 conforming loan limits
- CFPB: FHA loans
- HUD Handbook 4000.1 glossary, August 12, 2026
- HUD current handbook directory: August 2026 update
- HUD FHA Roster Appraisers: observation and inspection limits
- HUD programs: Section 203 one-to-four-family mortgage insurance
- HUD ML 2025-23: 2026 forward mortgage limits
- HUD ML 2023-05: upfront and annual MIP
- HUD ML 2013-04: annual MIP duration
- HUD ML 2010-29: baseline credit and financing
- HUD ML 2026-11: future credit-model options
- HUD FHA policy news: proposals versus operative rules
- VA: direct and privately funded VA-backed loan types
- VA: COE confirms benefit eligibility, not final loan approval
- VA Chapter 3: purchase amounts, financed funding fee and occupancy
- VA Chapter 4: current underwriting, DTI and residual-income principles
- VA Chapter 12: current post-May 2026 MPR reference
- VA: purchase loans
- VA: full and remaining entitlement
- VA: funding fee and closing costs
- VA Form 26-10291: approved assumption and entitlement
- USDA: Section 502 Guaranteed program
- USDA: Section 502 Direct program
- USDA HB-1-3555 Chapter 16: separate guarantee fees
- USDA Rural Development: FY 2027 fee notice, September 16, 2026
- CFPB: what private mortgage insurance protects
- CFPB: PMI cancellation and scheduled termination
- CFPB Loan Estimate explainer
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.