Finance
Mortgage insurance premium (MIP) is associated with which type of loan?
AConventional loans with 20% down
BFHA loans✓ Correct
CVA loans
DUSDA loans
Explanation
MIP (mortgage insurance premium) is required on FHA loans, both as an upfront payment and an annual premium. It insures the lender against borrower default.
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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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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.
Math Concepts
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