opens in a new windowFHA home loans have 2 forms of mortgage insurance. FHA borrowers pay both a monthly fee and a one time up-front premium (usually financed into loan).
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How FHA Mortgage Insurance Works
Like many loan products, FHA charges opens in a new windowmortgage insurance. Unlike most loan products, FHA MI consists of 2 elements (up front premium and monthly). Additionally, the monthly mortgage insurance is unique to FHA with regard to how it is paid.
First and foremost, understanding the acronyms that surround FHA mortgage insurance is important. From MI to MIP, knowing which apply to FHA helps.
- UMIP: Up Front Mortgage Insurance Premium (Often called MIP or MI)
- MIP: Mortgage Insurance Premium (often called MI) – see rates below
Up-Front Mortgage Insurance Premium (UMIP)
FHA’s UMIP is a one time fee charged by FHA. Typically, home-buyer’s finance this into their new FHA loan. However, FHA UMIP can be paid for in it’s entirety up front. FHA UMIP costs 1.75% of the borrower’s base FHA loan amount.
FHA UMIP equals the FHA loan amount multiplied by the appropriate UMIP factor. Once the UMIP is added to this base loan amount the resulting loan amount is called the “Final FHA loan amount”. This is the amount borrowed by an FHA borrower. Their monthly payments are also based upon this amount.
Phone: 602.435.2149
Email: Team@JeremyHouse.com
FHA Monthly Mortgage Insurance Premium (MIP)
In addition to paying the UMIP, FHA borrowers also pay a second form of insurance. While most call this insurance monthly mortgage insurance, it is technically an annual mortgage insurance premium. As a result, the acronym for this insurance is “MIP”.
However, the annual FHA MIP is divided into 12 equal installments each year. Then, FHA homeowners pay the premium in monthly payments along with their regular mortgage payment. Therefore, most know and refer to this as a monthly mortgage insurance charge.
FHA Mortgage Insurance Rates
Phone: 602.435.2149
Email: Team@JeremyHouse.com
Does FHA Monthly MI Ever Go Away?
FHA monthly MI no longer goes away at any point. In fact, regardless of the equity an FHA homeowner gains they still have monthly MI for the life of their FHA loan. However, FHA loans with case numbers dated prior to June 3, 2013 follow a different set of rules regarding MI elimination.