Residential Sales Training Practice Test

Financing type sets how the lender evaluates the property and the costs that come with the loan, so it directly shapes both the appraisal and the closing.

Appraisal standards vary by program. FHA and VA require appraisals that verify the home meets specific minimum property standards for safety and habitability, and may require repairs to be completed or credits given before closing. USDA has its own rural-property criteria as well. Conventional loans rely on a standard market-value appraisal without the same mandatory repair thresholds. Because the appraisal determines both loan approval and the maximum loan amount, it can influence whether the sale proceeds as planned or if adjustments are needed.

Down payment requirements differ by program. Some loans—like VA and USDA—often allow little or no down payment, while FHA typically requires a minimum down payment (often around 3.5%), and conventional loans vary based on credit and program, commonly 3% to 20%. This affects how much cash the buyer must bring to closing and how much financing is available.

Closing costs and ongoing loan charges also depend on the financing type. FHA includes upfront and annual mortgage insurance premiums; conventional loans may require private mortgage insurance if the down payment is below 20%. VA loans have their own funding fee and typically no ongoing mortgage insurance, while USDA loans have guarantees with their own cost structure. These differences influence the total closing cost you’ll face and the way those costs are financed or paid at closing. Contingencies and the handling of appraisal results are also affected, since some loan types allow more room for negotiation or required repairs if the appraisal comes in low or if the property doesn’t meet program standards.

So, financing type matters because it determines appraisal criteria, required down payment, closing costs, and how appraisal outcomes influence the path to closing.