Which loan type is commonly associated with an upfront mortgage insurance premium?

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Prepare for the Utah Mortgage PLM Exam. Study with flashcards and multiple choice questions, with each question providing hints and explanations. Gear up for test day!

Multiple Choice

Which loan type is commonly associated with an upfront mortgage insurance premium?

Explanation:
An upfront mortgage insurance premium is a one-time fee charged at closing to fund mortgage insurance for certain loan programs. This feature is most closely associated with FHA loans. The FHA requires an upfront MIP (and also a monthly mortgage insurance payment) to insure the loan, and the upfront portion can often be financed into the loan amount. Other programs handle mortgage insurance differently: VA loans do not require mortgage insurance at all (they use a funding fee instead), USDA loans have an upfront guarantee fee, and conventional loans use private mortgage insurance when the down payment is less than 20% (which can be paid upfront in some cases but isn’t described as an upfront mortgage insurance premium in the same way).

An upfront mortgage insurance premium is a one-time fee charged at closing to fund mortgage insurance for certain loan programs. This feature is most closely associated with FHA loans. The FHA requires an upfront MIP (and also a monthly mortgage insurance payment) to insure the loan, and the upfront portion can often be financed into the loan amount.

Other programs handle mortgage insurance differently: VA loans do not require mortgage insurance at all (they use a funding fee instead), USDA loans have an upfront guarantee fee, and conventional loans use private mortgage insurance when the down payment is less than 20% (which can be paid upfront in some cases but isn’t described as an upfront mortgage insurance premium in the same way).

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