Suppose you are interested in taking an FHA mortgage loan fo

Suppose you are interested in taking an FHA mortgage loan for $350,000 in order to purchase your principal residence. In order to do so, you must pay an additional up-front mortgage insurance premium UFMIP) of 1.0% of the mortgage balance if the interest rate on the fully amortizing mortgage loan is 6% and the term is 30 years and the UFMIP is financed (ie, it is included in the loan amount, what is the dollar portion of your monthly mortgage payment that is designated to cover the UFMIP? Multiple Choice $20.98 $291.67 $2,119.41 $3,500.00

Solution

Answer - $291.67

350,000 * .01 = 3500 anually

where 1% is the mortgage insurance which is included in the mortgage.

3500/12 = 219.67 dollar portion of the monthly mortgage payment that is designated to covere UFMIP.