UFMIP is paid?

UFMIP, or Upfront Mortgage Insurance Premium, is a required fee for certain types of loans, particularly those backed by the Federal Housing Administration (FHA). This premium is collected to provide insurance to lenders in case of borrower default. The correct answer indicates that UFMIP is paid in full at the time of closing, which is when the borrower finalizes the loan agreement and pays any associated costs necessary to complete the transaction.

Paying UFMIP at closing allows the lender to process the insurance upfront, securing the mortgage insurance protection from the start of the loan. This is significant because it ensures that the lender is protected right away, rather than waiting for periodic payments throughout the loan term. It also simplifies the financial arrangement for the borrower, as this premium can sometimes be rolled into the loan amount if the borrower chooses not to pay it out-of-pocket at closing.

Other payment options, such as at maturity, annually, or monthly, do not align with the typical structure of UFMIP. Thus, understanding when and how UFMIP is paid is crucial for managing costs associated with FHA loans effectively.