FHA Mortgage Insurance Premium (MIP)

 

FHA Mortgage Insurance

The FHA Mortgage Insurance Premium is an important part of every FHA loan.

There are actually two types of Mortgage Insurance Premiums associated with FHA loans:

    • Up Front Mortgage Insurance Premium (UFMIP) – financed into the total loan amount at the initial time of funding
    • Monthly Mortgage Insurance Premium – paid monthly along with Principal, Interest, Taxes and Insurance

Conventional loans that are higher than 80% Loan-to-Value also require mortgage insurance, but at a relatively higher rate than FHA Mortgage Insurance Premiums.

Mortgage Insurance is a very important part of every FHA loan since a loan that only requires a 3.5% down payment is generally viewed by lenders as a risky proposition.

Without FHA around to insure the lender against a loss if a default occurs, high LTV loan programs such as FHA would not exist.

Calculating FHA Mortgage Insurance Premiums:

Up Front Mortgage Insurance Premium (UFMIP)

Currently all FHA loans, the UFMIP is equal to 1.75%  of the Base FHA Loan amount.

For Example:

>> If John purchases a home for $100,000 with 3.5% down, his base FHA loan amount would be $96,500

>> The UFMIP of 1.751% is multiplied by $96,500, equaling $1,688.75

>> This amount is added to the base loan, for a total FHA loan of $98,188.75

>> Resulting in NO out-of-pocket expense for the UFMIP

 

Monthly Mortgage Insurance (MMI): (effective April 2013)

  • Equal to 1.35% of the loan amount divided by 12 – when the Loan-to-Value is greater than 95% and the term is greater than 15 years
  • Equal to 1.30% of the loan amount divided by 12 – when the Loan-to-Value is less than or equal to 95%, and the term is greater than 15 years
  • Equal to .70% of the loan amount divided by 12 – when the Loan-to-Value is greater to 90%, and the term is less than or equal to 15 years
  • Equal to .45% of the loan amount divided by 12 – when the Loan-to-Value is less than or equal to 90%, and the term is less than or equal to 15 years

FHA_new_MIP_rates

Duration of Monthly Mortgage Insurance (MMI): (New – effective April 2013)

 

FHA_MIP_durations_4-1

 

 

 

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