Which statement about FHA mortgage insurance is true?

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Multiple Choice

Which statement about FHA mortgage insurance is true?

FHA mortgage insurance is required on all FHA loans to protect the lender in case the borrower defaults. Because the loan is insured by the FHA, lenders are willing to offer favorable terms, but that protection comes with a cost for the borrower. There are two parts: an upfront mortgage insurance premium (UFMIP) paid at closing (often financed into the loan) and an annual mortgage insurance premium (MIP) that is paid monthly as part of the mortgage payment. The upfront fee is typically 1.75% of the loan amount, and the annual MIP rate varies based on factors like loan amount, loan-to-value, and loan term. So the statement that mortgage insurance premium is required on all FHA loans is the correct one.

FHA mortgage insurance is required on all FHA loans to protect the lender in case the borrower defaults. Because the loan is insured by the FHA, lenders are willing to offer favorable terms, but that protection comes with a cost for the borrower. There are two parts: an upfront mortgage insurance premium (UFMIP) paid at closing (often financed into the loan) and an annual mortgage insurance premium (MIP) that is paid monthly as part of the mortgage payment. The upfront fee is typically 1.75% of the loan amount, and the annual MIP rate varies based on factors like loan amount, loan-to-value, and loan term. So the statement that mortgage insurance premium is required on all FHA loans is the correct one.

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