A borrower is purchasing a home for $350,000 in a county where the FHA loan limit is $420,680. The borrower makes a 5% down payment and finances the MIP. What is the loan-to-value ratio used for calculating the annual MIP?
Correct Answer
C) 97.75%
When the upfront MIP is financed into the loan amount, it increases the loan amount above the base loan amount. The annual MIP is calculated on the loan amount including the financed upfront MIP, which typically results in an LTV of approximately 97.75% for a 5% down payment scenario.
Why This Is the Correct Answer
When the upfront MIP is financed into the loan amount, it increases the loan amount above the base loan amount. The annual MIP is calculated on the loan amount including the financed upfront MIP, which typically results in an LTV of approximately 97.75% for a 5% down payment scenario.
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