In Addition to the UFMIP (Up-Front Mortgage Insurance Premium), the Owner-Occupant

question 27

Multiple Choice

In addition to the UFMIP (up-front mortgage insurance premium) , the owner-occupant borrower who decides to use an FHA mortgage loan will normally pay an additional annual mortgage insurance premium (MIP) that depends on the loan-to-value ratio and the term of the loan. For loans with maturity longer than 15 years and a loan to value ratio that is greater than 95 percent, the MIP will be what percentage of the average annual loan balance?

• A) 0.25%
• B) 0.50%
• C) 1.10%
• D) 1.15%

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Definitions:

Market Price

The prevailing cost at which one can buy or sell an asset or service.

Marginal Cost

The augmentation in total costs associated with the production of an additional unit of a product or service.

Cartel

A group of independent market participants who collude to control prices and production in order to monopolize a market.

Fixed Cost

Costs that do not change with the level of output, such as rent or salaries.