FHA Mortgage Insurance outline

FHA home loans have 2 forms of mortgage insurance. FHA borrowers pay both a monthly mortgage insurance fee and a one time up-from mortgage insurance premium (usually financed into loan).

How FHA Mortgage Insurance Works

Like many loan products, FHA charges mortgage insurance. Unlike most loan products, FHA mortgage insurance 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 Up-Front Mortgage Insurance Premium 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 Upfront Mortgage Insurance Premium costs 1.75% of the borrower’s base FHA loan amount.

Up-Front Mortgage Insurance Premiums equal 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.

FHA Monthly Mortgage Insurance Premium (MIP)

In addition to paying the UMIP, FHA borrowers also pay a second form of mortgage 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 FHA annual mortgage insurance premium 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 Annual MIP Rates w/ Term > 15 Years

Base Loan AmountLoan to Value (LTV)Annual MIP Rate
≤$625,500≤ 95%.80%
≤$625,500> 95%.85%

FHA Annual MIP Rates w/ Term ≤ 15 Years

Base Loan AmountLoan to Value (LTV)Annual MIP Rate
≤$625,500≤ 90%.45%
≤$625,500> 90%.70%
>$625,000≤ 78%.45%
>$625,00078.01 – 90.00%.70%

Does FHA Monthly MI Ever Go Away?

FHA monthly mortgage insurance no longer goes away at any point. In fact, regardless of the equity an FHA homeowner gains they still have monthly mortgage insurance 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 mortgage insurance elimination.