Mortgage Insurance (MIP)
FHA loans allow you to finance up to 96.5% of the purchase price of your new home. That makes it an attractive option for many homebuyers, but also puts FHA-approved lenders at risk to lose a lot of money in the instance that a borrower defaults on their loan. To help protect lenders from this possibility and continue offering high-risk borrowers such flexible loans, the FHA mandates a Mortgage Insurance Premium (MIP).
FHA Mortgage Insurance Premium
Borrower’s pay the FHA’s mortgage insurance premium as part of the monthly payments to lenders. Your annual MIP cost—and how long you have to continue paying it—varies based on a few factors: your loan’s term length, your loan-to-value ratio, as well as when you received your loan. For example, FHA loans with terms of 15 years or less qualify for reduced MIP, as low as 0.45%.
2022 MIP Rates for FHA Loans Over 15 Years
If you take out a typical 30-year mortgage or anything greater than 15 years, your annual mortgage insurance premium will be as follows:
| Base Loan Amount | LTV | Annual MIP |
|---|---|---|
| ≤ $625,500 | ≤ 95% | 80 bps (0.80%) |
| ≤ $625,500 | > 95% | 85 bps (0.85%) |
| >$625,500 | ≤ 95% | 100 bps (1.00%) |
| > $625,500 | > 95% | 105 bps (1.05%) |
2022 MIP Rates for FHA Loans Up to 15 Years
Homebuyers who can afford to pay off their loans quicker and opt for a shorter term, such as a 15-year mortgage, will benefit from lower mortgage insurance premiums, as follows:
| Base Loan Amount | LTV | Annual MIP |
|---|---|---|
| ≤ $625,500 | ≤ 90% | 45 bps (0.45%) |
| ≤ $625,500 | > 90% | 70 bps (0.70%) |
| > $625,500 | ≤ 78% | 45 bps (0.45%) |
| > $625,500 | 78.01% to 90% | 70 bps (0.70%) |
| > $625,500 | > 90% | 95 bps (0.95%) |
MIP Cancellation
Borrowers who were approved for FHA loans before June 2013, 2013 are eligible for MIP cancellation after 5 years. They must have 22% equity in their home, and must be on-time with all mortgage payments. Homeowners with FHA loans issued after that date must refinance into a conventional loan and have a current LTV of 80% or greater.
Upfront Mortgage Insurance Premium
In addition to the MIP, the FHA also requires that all borrowers pay an upfront mortgage insurance premium (UFMIP) at the closing. This amounts to 1.75% of the borrowed amount. So, if you were to borrow $250,000, you’d pay a premium of $4,375. typically ranges between 0.80% and 0.85% of the borrowed amount, depending upon your LTV. There’s a table on the Department of Housing and Urban Development website that shows exactly how much your mortgage insurance premiums would be based on how much you borrow.
FHA Loan Articles
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August 23, 2022Sometimes when buying a home there may be a question of surplus or excess land. You likely won’t face this issue when buying a condo unit, but for other types of purchases, this may be an important factor in the appraisal process.
August 4, 2022Your lender is required to make sure you can realistically afford your mortgage, and that means verifying that your income is stable, reliable, and will continue after your mortgage has closed. What some don’t realize about this process is that there are standards for verifying income.
July 9, 2022Planning your FHA loan means asking some important questions early in the process. The most obvious question is associated with the type of home you want. How large a house do you need? FHA mortgages allow the purchase of homes with between one and four living units.
June 30, 2022Before you get ready to commit to a home loan application, it’s good to review your circumstances and ask a few basic questions about your loan, your plans, and the home itself. Believe it or not, knowing what type of home loan you need is an important step.
