Finance
FHA mortgage insurance (MIP) is paid by the borrower and protects:
AA. The borrower against default
BB. The lender against borrower default✓ Correct
CC. The property against physical damage
DD. The title company against title defects
Explanation
FHA's Mortgage Insurance Premium protects the lender, not the borrower. If the borrower defaults, FHA pays the lender's claim.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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