Qualified And Non-Qualified Mortgage Essentials Practice Test

For borrowers with credit scores of 500-579, FHA financing is up to what LTV?

70% LTV 80% LTV 85% LTV 90% LTV

Correct Answer:

90% LTV

Explanation:

The key idea is how FHA sets the maximum loan amount as a percentage of the home’s value (the LTV) based on credit score. For borrowers with a credit score of 500–579, FHA requires a larger down payment to offset higher risk, typically at least 10%. A 10% down payment means you can borrow up to 90% of the purchase price or appraised value (LTV 90%). So, the highest financing you can get in this score range is 90% LTV. (Keep in mind that FHA loans with this credit range also carry mortgage insurance.)

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