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%.
2021 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%) |
2021 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 cancelation 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
June 8, 2021While an FHA home loan is a good option for first-time homebuyers who don’t have enough money saved for a large down payment, it’s important to understand the ins and outs of the FHA guidelines, and what it takes to get approved as a borrower.
June 1, 2021This wait isn’t easy when you've been shopping for a new home. But getting a home inspection is a crucial step, and not one you should consider skipping. Make sure you hire a reliable home inspector, wait for your inspection report, and watch out for these red flags.
May 20, 2021Many first-time homebuyers need some help understanding and navigating the ins and outs of the mortgage process, and down payments are an essential part of that. A down payment is an upfront installment made on a large purchase while the remainder is paid off with a loan.
May 13, 2021Buying and financing a home is complicated and can become overwhelming. It's important for you to stay informed, and know what your options are. So, start with the basics and read about the four different mortgage types available before approaching a lender.
May 8, 2021With a new waiver in place, Dreamers have access to affordable FHA home loans designed for first-time homebuyers. There is no discrepancy in the FHA’s eligibility requirements when it comes to DACA status holders applying for an FHA-backed mortgage. They must meet all the same criteria.
April 30, 2021Buying a house is overwhelming to begin with. Make it a seller’s market, and buyers become even more nervous. Supply of real estate has been low for most of 2021, in part because of the Coronavirus pandemic and the historically low interest rates since 2019.
