Which funding mechanism is used for the FHA program?

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Multiple Choice

Which funding mechanism is used for the FHA program?

FHA loans are funded through Mortgage Insurance Premiums. The FHA insures the loan, and borrowers pay premiums to fund that insurance. There is usually an upfront MIP paid at closing and ongoing annual MIP that's included in monthly payments, which protects lenders against losses if a borrower defaults. This setup makes it possible for borrowers to qualify with smaller down payments and more flexible credit requirements. Other terms listed don’t describe how the FHA program is funded—private mortgage insurance is used with many conventional loans, while taxes are separate charges.

FHA loans are funded through Mortgage Insurance Premiums. The FHA insures the loan, and borrowers pay premiums to fund that insurance. There is usually an upfront MIP paid at closing and ongoing annual MIP that's included in monthly payments, which protects lenders against losses if a borrower defaults. This setup makes it possible for borrowers to qualify with smaller down payments and more flexible credit requirements. Other terms listed don’t describe how the FHA program is funded—private mortgage insurance is used with many conventional loans, while taxes are separate charges.

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