Questions and Answers
What are FHA mortgage insurance premiums?
Required for all FHA insured mortgage loans, regardless of the down payment.
All of the following statements about the FHA are accurate, EXCEPT:
What does FHA section 203(b) mortgage insurance cover?
The purchase or refinance of an owner-occupied one- to four-family property.
All of the following statements about the FHA up-front mortgage insurance premium (UFMIP) are accurate, EXCEPT:
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What is an annual mortgage insurance premium (AMIP)?
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All of the following statements about a section 203(b) FHA insured mortgage loan are accurate, EXCEPT:
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What is the purpose of the VA mortgage loan program?
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All of the following statements about entitlement for VA guaranteed mortgage loans are accurate, EXCEPT:
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All of the following statements about VA guaranteed mortgage loans are accurate, EXCEPT:
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All of the following statements about conventional mortgage loans are accurate, EXCEPT:
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What is Private Mortgage Insurance (PMI)?
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What is usury?
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The interest for 3 months is $300 on an interest-only, level payment, term loan with an interest rate of 5%. What is the principal balance?
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A $24,000 interest-only, level payment, term loan has interest of $200 after 2 months. What is the rate of interest on the loan?
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A $24,000 interest-only, level payment, term loan has a rate of 5% and interest due in the amount of $600. How long has the loan been outstanding?
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Study Notes
FHA Mortgage Insurance and Loans
- FHA mortgage insurance premiums are mandatory for all FHA-insured loans, independent of down payment; they cannot be canceled and last for the loan’s duration.
- FHA is part of the Department of Housing and Urban Development (HUD) and does not directly protect borrowers.
- Section 203(b) covers purchases or refinances of owner-occupied, one- to four-family properties.
- The Up-Front Mortgage Insurance Premium (UFMIP) is typically 1.75% of the loan amount and paid at closing; it is not an annual fee as commonly mistaken.
Mortgage Insurance Premiums
- The Annual Mortgage Insurance Premium (AMIP) is set at 0.85% of the outstanding loan balance, divided into monthly payments.
- UFMIP can be covered by the borrower, seller, or third parties; it is not paid annually for the loan term.
VA Mortgage Loan Program
- The VA mortgage loan program guarantees loans for veterans, enabling homeownership opportunities.
- Eligibility for VA loans requires a certificate of eligibility, but not all veterans qualify regardless of service time.
- Veterans can reuse their entitlement if prior VA loans are repaid and there is a maximum entitlement amount based on the veteran's eligibility.
Conventional Mortgage Loans
- Conventional loans are generally seen as riskier for lenders compared to FHA or VA loans but typically require higher down payments.
- They often carry higher interest rates than government-insured loans and are not backed by any governmental agency.
Private Mortgage Insurance (PMI) and Usury
- PMI is insurance that protects lenders from borrower defaults, which borrowers must pay.
- Usury refers to the practice of charging interest rates above legally established limits.
Loan Calculations
- For an interest-only loan with 5% interest over three months amounting to $300, the principal balance is calculated to be $24,000.
- A loan of $24,000 yielding $200 in two months corresponds to an interest rate of 5%.
- If a $24,000 loan has $600 in interest at a 5% rate, it indicates the loan has been outstanding for six months.
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Description
Test your knowledge on FHA mortgage insurance premiums and their requirements with this Chapter 13 review quiz. Understand key differences between FHA and conventional loans, and the implications of mortgage insurance. Perfect for anyone studying real estate finance.