FHA Mortgage Insurance

FHA Mortgage insurance is available for housing though FHA to protect mortgage lenders against loss. For a small fee, FHA mortgage applicants can obtain insurance for a value of 96.5% of the purchase price or  appraised value the lesser of the two. FHA loans are insured through a combination of a small upfront mortgage insurance premium (UFMIP) equal to 1.75% of the loan amount, as well as a small monthly mortgage insurance (MMI) premium of .55% paid monthly included in the mortgage payment..

The FHA insures only a limited range of mortgages provided by FHA approved mortgage lenders. PMI insurers service mortgages of the conventional market. PMI is required if a mortgage applicant borrowers more than 80% of the property’s purchase price in one loan; the FHA mortgage insurance is required for any FHA home loan, regardless of the size of the down payment provided. The premiums for both mortgage insurances get cancelled when the loan amount is less than 80% of the loan amount for FHA its 78% of the loan amount the monthly MIP= (mortgage insurance premium) is removed from the monthly mortgage payment.

Here is a description of how both fees are paid by FHA mortgage applicants.

·         (UFMIP) Upfront Mortgage Insurance Premium= 1.75% of the loan amount financed into the purchase price.

Example purchase price           =$100,000

Down payment 3.5%               = $3,500

New loan amount x UPMIP       $96,500 x 1.75 =$1,688 financed into the loan amount

New Total Loan amount            $98,188

·         (MIP) Mortgage Insurance Premium- .55% of the loan amount per year paid 1/12 per month included in the mortgage payments

MIP = 100,000 x .55%= 550 per year = $45.83 included in your monthly mortgage payment.