Mortgage Insurance Premiums (MIP)

FHA mortgage insurance, typically referred to as MIP, is the one closing cost that is unique to FHA mortgage programs. 

**Every FHA mortgage must have mortgage insurance regardless

of the amount of the down payment.**

There are two types of mortgage insurance for FHA insured loans – Up-front Mortgage Insurance Premiums and Monthly Mortgage Insurance Premiums.

Up-front Mortgage Insurance Premium (UFMIP)

UFMIP is calculated at 1.75% of the base loan amount on all loans, regardless of the down payment amount.  This insurance protects the lender against losses in the event that the borrower defaults on the loan. 

**The entire amount of the UFMIP can be financed into the loan amount!**

For example:

• If the FHA loan amount is $100,000 (base loan amount)
• The mortgage insurance premium would be $1,750 ($100,000 x 1.75%)
• The mortgage amount including MIP would be $101,750 ($100,000 + $1,750)

What really happens during an FHA mortgage transaction is that the borrower owes FHA a lump sum mortgage insurance premium.  The lender making the FHA loan will actually lend the money for the premium to the borrower and send the money to FHA so that the mortgage will be insured. 

Monthly Mortgage Insurance Premium

In addition to the UFMIP, there may be a monthly premium due as well.  The monthly premium is .80% of the base loan amount if the loan amount is less than or equal to 95% of the value of the home.  If the loan amount is over 95% of the value of the home, the monthly premium is .85% of the base loan amount..

On a 30 year fixed loan, the monthly payment would be calculated as follows:

$100,000 x .80% = $800 / 12 months = $66.67 per month

There are two types of monthly mortgage insurance for FHA mortgages:

Condominiums - Monthly mortgage insurance on condominiums is stable at .85% over the life of the loan.

All other properties – The amount of monthly MIP and the length of the premium depends upon the amount of the down payment or the loan to value as stated above. 

Click Get Rates to view your new FHA rate and payment.

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