What are the two types of mortgage insurance charged on an FHA loan?

What are the two types of mortgage insurance charged on an FHA loan?

• A. UFMIP - Up Front Mortgage Insurance and Annual Mortgage Insurance Premium (MIP)
• B. PMI and LPMI
• C. Private Mortgage Insurance (PMI) and FHA Mortgage Insurance
• D. Front-end MIP and Back-end MIP

Answer: (A)

FHA loans require mortgage insurance, and it comes in two forms. The Up Front Mortgage Insurance Premium (UFMIP) is paid at closing (and it can be financed into the loan). The Annual Mortgage Insurance Premium (MIP) is paid monthly as part of the mortgage payment and is calculated as a percentage of the outstanding loan balance, with the rate varying based on factors like loan amount, loan term, and down payment. This ongoing monthly premium is what protects lenders over the life of the loan. This mechanism is different from PMI or LPMI, which are associated with conventional loans, not FHA. So, the two types you’d see on an FHA loan are UFMIP and Annual MIP.

FHA loans require mortgage insurance, and it comes in two forms. The Up Front Mortgage Insurance Premium (UFMIP) is paid at closing (and it can be financed into the loan). The Annual Mortgage Insurance Premium (MIP) is paid monthly as part of the mortgage payment and is calculated as a percentage of the outstanding loan balance, with the rate varying based on factors like loan amount, loan term, and down payment. This ongoing monthly premium is what protects lenders over the life of the loan. This mechanism is different from PMI or LPMI, which are associated with conventional loans, not FHA. So, the two types you’d see on an FHA loan are UFMIP and Annual MIP.