Which of the following types of mortgages typically carries two different types of mortgage insurance?

The correct answer is FHA. Federal Housing Administration (FHA) loans are unique because they require two types of mortgage insurance. The first type is an upfront mortgage insurance premium (UFMIP), which borrowers pay at closing. This fee is typically a percentage of the loan amount and is rolled into the total mortgage amount. The second type is the annual mortgage insurance premium (MIP), which is paid monthly as part of the mortgage payment.

This dual requirement is designed to protect lenders against potential defaults, as FHA loans are aimed at borrowers with lower credit scores and smaller down payments. The combination of both premiums helps maintain the stability of the FHA insurance fund, ensuring that it can fulfill claims in the event a borrower defaults on their mortgage.

In contrast, other loan types do not follow this structure. For instance, VA loans do not require mortgage insurance at all; conventional loans may require private mortgage insurance (PMI) but typically do not have the upfront and monthly insurance structure found in FHA loans; and subprime mortgages may involve higher rates and less favorable terms but aren’t specifically defined by a dual mortgage insurance requirement. Thus, FHA stands out for its specific mandate for two types of mortgage insurance.