An FHA purchase closes with 3.5% down on a $290,000 price, a 30-year term, and the borrower asks how long the annual mortgage insurance runs. For an FHA case number assigned under the post-June-2013 MIP duration rules, how long is annual MIP generally required at this initial LTV?
Correct Answer
B) For the life of the loan, because the down payment is under 10% here
B. Annual MIP applies for the mortgage term at this initial LTV. A 3.5% down payment implies 96.5% initial LTV on the stated purchase basis. HUD’s post-June 3, 2013 duration table assigns the loan term to a mortgage over 15 years with initial LTV above 90%. Scope and exceptions: Loan term does not mean premiums continue after the loan is paid off. Case-assignment date and initial LTV matter; do not import conventional PMI cancellation rules or claim refinancing is necessarily beneficial. Source: Cases assigned on or after June 3, 2013: duration table — https://entp.hud.gov/sfohlp/f17updbal.cfm
Why This Is the Correct Answer
B. Annual MIP applies for the mortgage term at this initial LTV. A 3.5% down payment implies 96.5% initial LTV on the stated purchase basis. HUD’s post-June 3, 2013 duration table assigns the loan term to a mortgage over 15 years with initial LTV above 90%. Scope and exceptions: Loan term does not mean premiums continue after the loan is paid off. Case-assignment date and initial LTV matter; do not import conventional PMI cancellation rules or claim refinancing is necessarily beneficial.
Why the Other Options Are Wrong
Option A: Until the balance reaches 78% of the original price of the property
Later reaching 78% does not cancel MIP under this duration category.
Option C: For 5 years, after which the borrower may request cancellation of it
The five-year condition belongs to older eligible cases, not this one.
Option D: For 11 years, which is the term FHA applies to every 30-year loan
Eleven years is not the duration for every 30-year FHA mortgage.
Exam Tip
Determine FHA MIP duration from the applicable case-date rules and initial LTV.
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