Final answer:
Borrowers with an FHA backed mortgage loan must pay a monthly Mortgage Insurance Premium in addition to their regular monthly payments, as well as an upfront fee that's often rolled into the loan amount. The correct option is b.
Step-by-step explanation:
Under a basic FHA backed mortgage loan, borrowers must pay a monthly Mortgage Insurance Premium (MIP) in addition to the monthly mortgage payments. This requirement is in place to protect lenders in the event that a borrower defaults on the loan. The MIP includes an upfront payment that is typically financed into the loan and an annual insurance fee that is paid monthly.
Mortgage insurance is necessary for loans with lower down payments (often less than 20% of the home's value) which result in a higher risk to lenders. By including mortgage insurance, borrowers are able to access home financing with smaller down payments, as low as 3.5%, which must be factored into the total cost of the loan over time.
Hence, Option b is correct.