Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
The Federal Housing Administration, a division of the United States S. Department of Housing and Urban Development (HUD). Due to lower credit score and down payment requirements, FHA-approved lenders take on more risk, so borrowers are responsible for paying FHA mortgage insurance.
FHA borrowers are required to pay both upfront and yearly mortgage insurance premiums. When you first get your loan, you will be charged an upfront mortgage insurance premium (UFMIP), whereas the annual premium is a recurring cost that you must pay each year. In the event of a mortgage default, these mortgage insurance premiums (MIP) protect the lender. FHA MIP is frequently your responsibility for the duration of your loan.
How Does LendingTree Get Paid?
Companies on this website pay LendingTree, and this pay may have an impact on where and how offers appear on this website (such as the order). Not all lenders, savings products, or loan options are offered by LendingTree in the market.
Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
The Federal Housing Administration, a division of the United States S. Department of Housing and Urban Development (HUD). Due to lower credit score and down payment requirements, FHA-approved lenders take on more risk, so borrowers are responsible for paying FHA mortgage insurance.
FHA borrowers are required to pay both upfront and yearly mortgage insurance premiums. When you first get your loan, you will be charged an upfront mortgage insurance premium (UFMIP), whereas the annual premium is a recurring cost that you must pay each year. In the event of a mortgage default, these mortgage insurance premiums (MIP) protect the lender. FHA MIP is frequently your responsibility for the duration of your loan.
How much is FHA mortgage insurance?
The upfront mortgage insurance premium costs 1. 75% of your loan amount and is due at closing. For instance, if you borrow $250,000, your upfront MIP will be $4,375 ($250,000 x 1). 75% = $4,375).
The 1. No matter the loan amount or term, 75% UFMIP is applicable to the majority of FHA loans, excluding the following:
FHA MIP chart for loan terms longer than 15 years
| Loan amount | LTV ratio | MIP | How long? |
| Less than or equal to $625,500 | ≤ 90% | 0.80% | 11 years |
| > 90%, but ≤ 95% | 0.80% | Life of loan | |
| > 95% | 0.85% | Life of loan | |
| More than $625,500 | ≤ 90% | 1.00% | 11 years |
| > 90%, but ≤ 95% | 1.00% | Life of loan | |
| > 95% | 1.05% | Life of loan |
FHA MIP chart for loan terms less than or equal to 15 years
Less than or equal to $625,500 90% 0 Loan amount LTV ratio MIP How long 45% 11 years > 90% 0. 70% Life of loan More than $625,500 ≤ 78% 0. 45% 11 years > 78%, but ≤ 90% 0. 70% 11 years > 90% 0. 95% Life of loan .
The ongoing annual mortgage insurance premium ranges from 0. 45% to 1. 05% of the total is divided by 12 and added to your monthly mortgage payment. Your payment amount is determined by your loan-to-value (LTV) ratio and term of repayment.
FHA MIP vs. PMI
FHA loans only require mortgage insurance premiums, but conventional loans also have a requirement known as private mortgage insurance (PMI).
Similar to FHA mortgage insurance, PMI serves to safeguard the lender in the event that you default on your monthly mortgage payments. Contrary to FHA MIP, there is no upfront fee, though you may be able to pay PMI in full at closing. When conventional borrowers put down less than 20%, PMI is required. Your monthly PMI payment will depend on your credit score and LTV ratio and could range from $30 to $70 for every $100,000 you borrow to purchase a home.
As was already mentioned, FHA mortgage insurance premiums are frequently in place for the duration of your loan. On the other hand, once your home has 20% equity, you can stop paying PMI.
How to get rid of FHA mortgage insurance
Make at least a 10% down payment at closing to avoid FHA MIP, which is one of the primary ways to do so. You’ll still pay the premiums, but just for 11 years.
Refinancing into a conventional loan is another way to get an FHA MIP removal; however, there are a number of things you’ll need to do to get ready for a refi, such as:
If you’re a first-time home buyer, FHA mortgage insurance may not bother you too much. Instead of saving up for a 20% down payment, it might be more advantageous to put down a smaller amount and become a homeowner sooner. This would reduce the burden of carrying this additional loan cost.
Compare FHA Loans for Free Loan type:
FHA construction loan can help you build your dream home. Here’s how to get one.
In many counties throughout New Jersey, the single-family home FHA loan maximum has increased to $420,680.
In most counties of the state, the FHA loan limit for single-family homes in Vermont is now $420,680, with a small increase to $434,700 close to Burlington.
FAQ
What is the FHA MIP rate for 2022?
Upfront Mortgage Insurance Premium (UFMIP) = 1. For current FHA loans and refinances, 75% of the loan sum Annual Mortgage Insurance Premium (MIP) = 0. In most FHA loans and refinances, 85% of the loan amount is required.
How do you calculate FHA monthly MIP?
The monthly insurance premium, or MIP, is 0. 50 percent of the loan amount. Multiply the loan amount by 0. 50 percent, and divide the sum by 12. $197,342. 50 multiplied by 0. 005 is $986. 71; $986. 71 divided by 12 equals $82. 23.
How do I avoid FHA MIP?
If you put down 10% or more for FHA loans made on or after June 3, 2013, your MIP will disappear after you’ve repaid your loan for 11 years. If you put down less than 10%, you’ll probably need to refinance your mortgage to get rid of these monthly fees.
How do you calculate MIP rate?
Multiply previous balance times annual contract interest rate. Based on the value in the third decimal place, round the result to two (2) decimal places. Divide result by 1200. Based on the value in the third decimal place, round the result to two (2) decimal places.