Final answer:
The annual rate of the monthly mortgage insurance premium (MIP) paid on a 30-year FHA loan is 1.00%. This insurance is mandatory for lower down payments and protects lenders if the borrower defaults.
Step-by-step explanation:
The student has asked about the annual rate of the monthly mortgage insurance premium (MIP) that is paid as part of the monthly payment on a 30-year Federal Housing Administration (FHA) loan. The correct answer to the student's question is d) 1.00%. Mortgage insurance premiums are an additional fee included with the mortgage to protect lenders in case the borrower defaults on the loan. These premiums tend to increase the overall mortgage amount paid over time. This is particularly relevant for home buyers who choose to make a smaller down payment, which can be as low as 0-3.5%, rather than the traditional 20% down payment on a home's purchase price.