California Real Estate Practice Exam

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Prepare for the California Real Estate Exam. Study with flashcards and multiple-choice questions, each question includes hints and explanations. Get ready to ace your exam!

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Under an FHA program, monthly payments made (principal + interest) on a home loan must be:

horizontal payments
level payments
unamortized payments
varying payments

The correct answer is: horizontal payments

In an FHA program, the monthly payments made toward a home loan are designed to be level payments. This means that the total monthly payment remains consistent over the life of the loan, making it easier for borrowers to budget their finances. Level payments typically consist of both principal and interest, which are calculated in such a way that the borrower pays off the loan gradually over time without any fluctuations in the payment amount. While horizontal payments and varying payments might imply some form of fixed or fluctuating payment structure, they do not accurately represent the standard practice in FHA loans. Unamortized payments would suggest that the payments do not cover the interest accrued and principal repayment effectively, which is not the case for FHA loans that follow a consistent amortization schedule. Thus, level payments are essential for FHA loans because they provide predictability and stability, allowing homeowners to better manage their monthly financial obligations.