VA and USDA ______ loans

VA and USDA ______ loans

• A. Insures
• B. Guarantees
• C. Purchases
• D. Originates

Answer: (B)

The main concept here is government backing through a guarantee. VA and USDA loans are designed so that the government promises to cover a portion of the loan if the borrower defaults. That promise reduces the lender’s risk, which is why these programs can offer favorable terms for borrowers—no down payment on VA loans being a well-known example, and USDA loans often serving rural buyers. The government isn’t insuring the loan in the same way as FHA does; instead, it guarantees part of the loan to the lender. The loan itself is still originated by a private lender and may continue to be held or sold in the secondary market.

The main concept here is government backing through a guarantee. VA and USDA loans are designed so that the government promises to cover a portion of the loan if the borrower defaults. That promise reduces the lender’s risk, which is why these programs can offer favorable terms for borrowers—no down payment on VA loans being a well-known example, and USDA loans often serving rural buyers. The government isn’t insuring the loan in the same way as FHA does; instead, it guarantees part of the loan to the lender. The loan itself is still originated by a private lender and may continue to be held or sold in the secondary market.