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Need detailed answer with steps 36. Suppose you have obtained a 6%, 30 year fully-amortizing FHA...

Need detailed answer with steps

36. Suppose you have obtained a 6%, 30 year fully-amortizing FHA mortgage loan of $152,625 to finance the purchase of your primary residence. In so doing, you must pay an additional mortgage insurance premium (MIP) of 1.10%. If the first-year average loan balance is $151,775.25, determine the first-year monthly insurance premium payment.

A. $139.13

B. $1,025.69

C. $1,669.53

D. $1,678.88

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Answer #1

Mortgage insurance premium refers to the cover that is provided to the lender if the payment of the loan os less than 20% of the loan amount.Thus in order to protect the lender in the event of default , the borrower is required to pay insurance premium amount basically on home loans .

Therefore, to calculate the monthly insurance premium payment. We first need to calculate the yearly insurance premium on the average loan amount that is given.

Now the loan amount given for 1st year = $151775.25

The rate of insurance premium = 1.10%

Therefore , the yearly insurance premium =

1.10% * 151775.25 = $1669.53

Thus the monthly insurance premium for first year =

$1669.53 /12 = $139.13

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