FHA Loan Mortgage Insurance Requirement

Prepare for the Qualified and Non-Qualified Mortgage Test with comprehensive flashcards and multiple-choice questions. Ensure you understand every concept with detailed hints and explanations.

Mortgage insurance premium is required on all FHA loans to protect lenders in case a borrower defaults. This protection comes in two parts: an upfront premium paid at closing and an annual premium that is collected monthly for the life of the loan (the exact annual rate depends on factors like loan amount, loan-to-value, and loan term). Because FHA financing relies on this insurance, it applies regardless of whether the loan is fixed-rate or adjustable-rate. That’s why the other statements don’t fit: the premium is not optional, it isn’t never required, and it isn’t limited to fixed-rate loans.