Final answer:
A borrower's annual mortgage insurance premium (MIP) is based on factors such as the loan-to-value (LTV) ratio, the term of the loan, and the borrower's credit score.
Step-by-step explanation:
A borrower's annual mortgage insurance premium (MIP) is based on several factors, but one key factor is the loan-to-value (LTV) ratio. The LTV ratio is the amount of the loan compared to the value of the property being financed. The higher the LTV ratio, the higher the MIP. For example, if a borrower is looking to finance 90% of the property value, they will have a higher MIP than if they were only financing 80% of the value.
Another factor that affects the MIP is the term of the loan. Generally, loans with longer terms have higher MIPs. For example, a 30-year mortgage will have a higher MIP than a 15-year mortgage.
Additionally, the borrower's credit score can also impact the MIP. Borrowers with lower credit scores may be charged a higher MIP than those with higher scores.