Which of the following is true about UFMIP?

Which of the following is true about UFMIP?

• A. It is a monthly fee charged during the loan period
• B. It is mandatory for all mortgage types
• C. It provides coverage for the lender against default
• D. It is a discount for first-time home buyers

Answer: (C)

UFMIP, or Upfront Mortgage Insurance Premium, is a one-time fee that is paid at the closing of a mortgage loan that involves private mortgage insurance (PMI). The primary purpose of UFMIP is to provide coverage for the lender in case the borrower defaults on the loan. This means that if the borrower fails to repay the mortgage, the lender has some financial protection against potential losses due to the mortgage default. While other options may mention fees or discounts related to mortgages, those are not accurate descriptions of UFMIP. It’s essential to understand that UFMIP specifically relates to the insurance coverage mechanism designed to protect lenders, which is why it is the correct choice.

UFMIP, or Upfront Mortgage Insurance Premium, is a one-time fee that is paid at the closing of a mortgage loan that involves private mortgage insurance (PMI). The primary purpose of UFMIP is to provide coverage for the lender in case the borrower defaults on the loan. This means that if the borrower fails to repay the mortgage, the lender has some financial protection against potential losses due to the mortgage default.

While other options may mention fees or discounts related to mortgages, those are not accurate descriptions of UFMIP. It’s essential to understand that UFMIP specifically relates to the insurance coverage mechanism designed to protect lenders, which is why it is the correct choice.