An FHA borrower must pay a mortgage insurance premium (MIP). What is the purpose of FHA mortgage insurance?
Correct Answer
A) To protect the lender against loss in case the borrower defaults on the loan
FHA mortgage insurance protects the lender, not the borrower, against financial loss if the borrower defaults on the loan. It allows lenders to offer loans with lower down payments because the insurance reduces the lender's risk.
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