Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
FHA, VA, and USDA loans are government-backed programs designed to expand homeownership access for borrowers who may not qualify for conventional financing. Each program has specific eligibility requirements, property standards, and unique cost structures that are heavily tested on the NMLS exam.
- FHA Loans — Federal Housing Administration
FHA loans are insured by the Federal Housing Administration — a division of HUD. If a borrower defaults, FHA reimburses the lender for the loss.
Key FHA facts:
- Minimum down payment: 3.5% for borrowers with a credit score of 580 or above
- Minimum credit score for 3.5% down: 580
- Minimum credit score for 10% down: 500–579
- Upfront MIP (Mortgage Insurance Premium): 1.75% of the base loan amount — paid at closing or financed into the loan
- Annual MIP: Paid monthly as part of the payment — amount varies based on LTV and loan term
- MIP applies regardless of LTV — unlike conventional PMI which is removed at 80% LTV
- FHA loan limits vary by county — set annually by HUD
- FHA loans may be assumed by a creditworthy buyer
- Properties must meet FHA minimum property standards — inspected by an FHA-approved appraiser