Did You Know?

When you sign up for an FHA loan, you must pay a required mortgage insurance premium that protects lenders from incurring a loss.

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Mortgage Insurance (MIP)

FHA Mortgage Insurance Premium

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.

About the One-Time Close Constuction Loan
The upfront mortgage insurance premium (UFMIP) also needs to be paid at the time of closing. This is normally 1.75% of the loan amount.
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