Which type of insurance do FHA mortgage loans require?

FHA mortgage loans require loan insurance that protects lenders. This type of insurance is known as mortgage insurance premium (MIP). The FHA (Federal Housing Administration) insures loans made by approved lenders to borrowers with low to moderate incomes, allowing them to secure financing for homes with lower down payments. By requiring this insurance, the FHA provides lenders with a level of protection against potential default on these loans, enabling them to offer more favorable terms to borrowers, such as lower interest rates and reduced down payment requirements.

The other types of insurance mentioned, such as health insurance or term life insurance, do not relate directly to the financing or protection of mortgage loans. Homeowner's insurance, while crucial for protecting the property itself against damage or loss, does not specifically safeguard the lender against borrower default. Therefore, the correct answer highlights the unique role of loan insurance in the context of FHA mortgage loans.