An FHA borrower has been paying annual MIP for 8 years on a loan with an original LTV of 89%. The current unpaid principal balance represents 76% of the original property value. What happens to the MIP?
Correct Answer
A) MIP automatically cancels
For FHA loans with original LTV of 90% or less, annual MIP automatically cancels after 11 years OR when the loan balance reaches 78% of the original property value, whichever occurs first. Since this loan has an 89% original LTV and the balance is now 76% of original value, the MIP automatically cancels.
Why This Is the Correct Answer
For FHA loans with original LTV of 90% or less, annual MIP automatically cancels after 11 years OR when the loan balance reaches 78% of the original property value, whichever occurs first. Since this loan has an 89% original LTV and the balance is now 76% of original value, the MIP automatically cancels.
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