Question

To finance the purchase of a house valued at $200,000, a homebuyer takes-out an FHA-insured mortgage loan for $170,000. If this homebuyer defaults on the loan, what amount of this $170,000 loan will be covered by the FHA mortgage insurance?

Answer 1

The down-payment is important here.

Down-payment = Cost of the house – Amount of loan taken

                        = 200,000 – 170,000

                        = 30,000

% down-payment = (Down-payment / Cost of the house) × 100

                             = (30,000 / 200,000) × 100

                             = 15%

Since it is more than 3.5%, the whole loan amount (170,000) is covered under the insurance.

Answer: $170,000