California Real Estate Practice Exam

Which of the following properties could be purchased using FHA financing, but NOT VA financing? The purchase of:

1. a business.

2. a farm.

3. farm equipment.

4. income property/property to be rented to a tenant.

The correct answer is: a business.

The correct answer focuses on the nature of the properties and the specific lending guidelines of FHA and VA loans. FHA financing allows for the purchase of various types of residential properties, including certain income-generating properties like a multi-family home as long as the borrower occupies one of the units. However, it does not permit the purchase of properties that are strictly businesses, farms, or farm equipment. On the other hand, VA loans are primarily designed for veterans and active-duty military personnel and provide financing for residential properties where the borrower will live. VA loans do not typically finance the purchase of properties that are outright businesses or intended solely for commercial use, just like FHA loans. In this case, the purchase of a business falls outside the acceptable criteria for both FHA and VA financing, but given that the question specifies properties that can be financed with FHA but not VA, the focus here correctly indicates that FHA can finance certain property types, while VA has restrictions that make the purchase of a straightforward income property unsuitable under its guidelines. Unlike businesses or equipment, the other options may include farm lands that are classified under different lending regulations, but FHA may still allow for residential components on these. Thus, a transaction involving a business fits the criteria best for FHA vs. VA distinction