A borrower wants to qualify for a $185,000 FHA insured loan at 4% interest for 30 years with payments of $833.21. What would be the up-front MIP cost:$_____
To determine the upfront MIP (Mortgage Insurance Premium) cost for an FHA insured loan, you will need to calculate the loan-to-value (LTV) ratio and consult the MIP rate chart provided by the Federal Housing Administration (FHA).
Here's how you can calculate the upfront MIP cost:
1. Calculate the loan amount: Since the borrower wants to qualify for a $185,000 loan, this will be the loan amount.
2. Calculate the LTV ratio: The LTV ratio is the loan amount divided by the appraised value of the property. In this case, the appraised value is assumed to be the same as the loan amount. Therefore, the LTV ratio is 100% (185,000 / 185,000 = 1).
3. Refer to the MIP rate chart: The FHA provides an MIP rate chart based on the LTV ratio and the term of the loan. For a 30-year loan term and an LTV ratio of 100%, the upfront MIP rate is 1.75%.
4. Calculate the upfront MIP cost: Multiply the loan amount by the upfront MIP rate. In this case, the upfront MIP cost would be $185,000 * 1.75% = $3,237.50.
Therefore, the upfront MIP cost would be $3,237.50.
Keep in mind that this is a simplified explanation, and there may be other factors that can affect the loan qualification and MIP calculation. It's always recommended to consult with a qualified mortgage professional or the FHA for accurate and specific information regarding your situation.