FHA Mortgage Insurance

FHA insured mortgages require mortgage insurance. Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages and it's required primarily for borrowers making a down payment of less than 20%.

The mortgage insurance charged is .5% per year of the loan amount and is charged to the homeowner each month. In addition, FHA charges an upfront mortgage insurance premium of 1.5%.

FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:

• For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78%, provided the mortgagor has paid the annual premium for at least 5 years.
• For mortgages with terms 15 years and less and with loan to value ratios 90% and greater, then annual premiums will be canceled when the Loan to Value ratio reaches 78%, regardless of the amount of time the mortgagor has paid the premiums.
• Mortgages with terms 15 years and less and with loan to value ratios of 89.99% and less will not be charged annual mortgage insurance premiums.

First-time homebuyers considering an FHA home loan have plenty of questions, including one of the all-time most popular early inquiries: “How much can I borrow?” If you have done some Internet research on FHA loan limits in the past, check again—some reports are now out of date because of recent changes to the rules for FHA lending limits. FHA-insured mortgages and mortgage insurance requirements can be confusing, but the facts are simple. FHA home loans aren’t any more difficult to understand than a conventional loan. You just need to learn the lending vocabulary. When you decide to apply for an FHA Refinance loan, there are several questions you’ll need to answer to set the approval process in motion. Some questions are about planning issues, others are directly related to whether or not an FHA Refinance loan is for you.