Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

The correct answer highlights that under the Veterans Benefits Improvement Act of 2004, the VA guarantees traditional and hybrid adjustable-rate mortgages (ARMs). This means that eligible veterans can receive a guarantee that helps lower the risk for lenders, making it easier for veterans to obtain mortgage financing. The VA's guarantee applies to a variety of loan products, including both fixed-rate and adjustable-rate mortgages, thus encouraging lenders to extend credit to veterans.

Understanding the range of mortgage types that the VA actually guarantees is important for context. Simply limiting the guarantee to fixed-interest loans overlooks the flexibility and options available for veterans, including loans with variable rates that adjust over time. This diverse range better serves the needs of veterans, allowing them to choose loan products that align with their financial goals and circumstances.

The other options present loan types or guarantees that are not supported under this act: the VA does not specifically limit its guarantee to FHA loans or conventional loans alone. By including traditional and hybrid ARMs, the VA broadened access for veterans, providing a more versatile approach to home financing.