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

Question: 1 / 605

What is the late fee percentage typically charged for FHA and VA loans?

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4%

The late fee percentage typically charged for FHA and VA loans is commonly set at a flat rate of 4%. This percentage reflects the FHA’s and VA’s guidelines, which help ensure that borrowers are aware of the consequences of missing payment deadlines while providing flexibility to the lenders.

FHA and VA loans are government-backed loans designed to assist borrowers, especially first-time homebuyers, by offering more favorable terms. Setting a late fee at 4% is a way to maintain accountability for timely payments while also aligning with industry standards for similar loan types. This helps lenders manage risk associated with potential late payments effectively.

In contrast, lower percentages would not adequately incentivize timely repayments, while higher percentages could impose excessive financial strain on borrowers, which runs counter to the purpose of these loan programs aimed at promoting homeownership among a broader population.

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