Which of the following is NOT a characteristic of FHA loans?

FHA loans are known for several unique characteristics that make them attractive to homebuyers, especially first-time buyers. One characteristic of FHA loans is the requirement for a low down payment, typically as low as 3.5%. This feature makes homeownership more accessible for individuals who may not have substantial savings.

Another distinctive attribute is that FHA loans are assumable, allowing a new buyer to take over the existing loan under its current terms, which can be particularly beneficial in a rising interest rate environment. Additionally, FHA loans require mortgage insurance to protect lenders in case of default, which usually lasts for the life of the loan.

The choice indicating higher interest rates is not characteristic of FHA loans, as they generally offer competitive interest rates that are comparable to or even lower than conventional loans, depending on the borrower’s credit profile. This makes the assertion about higher interest rates incorrect in the context of FHA loans. Thus, understanding these characteristics can guide potential borrowers in making informed decisions about their mortgage options.