Finance
In Minnesota, a borrower who qualifies for both an FHA and conventional loan with equal rates should consider that FHA loans typically require:
AHigher down payments than conventional loans
BBoth upfront and annual mortgage insurance premiums (MIP) for the life of most FHA loans✓ Correct
CA minimum 700 credit score
DNo PMI regardless of down payment
Explanation
FHA loans require both an upfront MIP (1.75% of the loan amount at closing) and annual MIP for the life of most loans (if down payment is less than 10%).
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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