{"id":356,"date":"2021-08-17T05:53:57","date_gmt":"2021-08-17T05:53:57","guid":{"rendered":"https:\/\/xlnc.info\/instamortgage\/?p=356"},"modified":"2023-10-19T06:17:51","modified_gmt":"2023-10-19T06:17:51","slug":"understanding-mortgage-insurance-premium-mip","status":"publish","type":"post","link":"https:\/\/xlnc.info\/instamortgage\/understanding-mortgage-insurance-premium-mip\/","title":{"rendered":"Understanding Mortgage Insurance Premium (MIP)"},"content":{"rendered":"
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Disclaimer \u2013 all information in this article is accurate as of the date this article was written *<\/p>\n

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:<\/strong><\/p>\n

1. Up Front Mortgage Insurance Premium (UFMIP)<\/strong> – financed into the total loan amount at the initial time of funding<\/p>\n

2. Monthly Mortgage Insurance Premium –<\/strong> paid monthly along with Principal, Interest, Taxes and Insurance<\/p>\n

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.<\/p>\n

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 Bay Area lenders as a risky proposition.<\/p>\n

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

Calculating FHA Mortgage Insurance Premiums:<\/strong><\/p>\n

Up Front Mortgage Insurance Premium (UFMIP)<\/p>\n

UFMIP varies based on the term of the loan and Loan-to-Value.<\/p>\n

For most FHA loans, the UFMIP is equal to 1.00% of the Base FHA Loan amount (effective October, 2010).<\/p>\n

For Example:<\/p>\n

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

>> The UFMIP of 1.00% is multiplied by $96,500, equaling $965.00<\/p>\n

>> This amount is added to the base loan, for a total FHA loan of $97,465<\/p>\n

Monthly Mortgage Insurance (MMI):<\/strong><\/p>\n

Equal to .90% of the loan amount divided by 12 – when the Loan-to-Value is greater than 95% and the term is greater than 15 years
\nEqual to .85% 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
\nNo MMI when the loan to value is less than 90% on a 15 year term
\nThe Monthly Mortgage Insurance Premium is not a permanent part of the loan, and it will drop off over time.<\/p>\n

For mortgages with terms greater than 15 years, the MMI will be canceled when the Loan-to-Value reaches 78%, as long as the borrower has been making payments for at least 5 years.<\/p>\n

For mortgages with terms 15 years or less and a Loan -to-Value loan to value ratios 90% or greater, the MMI will be canceled when the loan to value reaches 78%. *There is not a 5 year requirement like there is for longer term loans.<\/p>\n

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