FHA Mortgage Insurance Explained

FHA Mortgage Insurance Explained

As you may know by now, FHA does not issue mortgages, they insure them. They offer various mortgage insurance programs which insures lenders against loss. Below is a list of requirements for different types FHA mortgage loans.

Upfront Mortgage Insurance Premium (UFMIP)

FHA requires a two-part mortgage insurance program with an upfront premium and an annual mortgage insurance premium.

The current UFMIP is 1.75% of the base loan amount.

Example: $200,000 base loan amount * 1.75% = $3,500. In this example, the UFMIP of $3500 would be charged to the borrower. FHA gives the borrower the choice to pay for this premium in cash (not really cash!) or finance it in the total loan amount. Most borrowers choose to finance the UFMIP.

There are certain exceptions when this premium is not charged such as an FHA Streamline Refinance of an existing FHA mortgage.

Annual Mortgage Insurance Premium (MIP)

Below is an MIP table which summarizes the amount charged for the annual mortgage insurance for different FHA mortgage terms. Keep in mind that in the greater Chicago market, the maximum FHA loan for a single-family loan is $365,700. Loan limits for 2-4 unit properties are higher.

MIP Calculations for Loan Terms Greater than 15 Years (i.e. 30-year fixed)

Loan to Value MIP Factor
Less than or equal to 95% (5% or more down) .80%
Greater than 95% to 96.5% (less than 5% down) .85%

MIP Calculations for Loan Terms of 15 Years or Less (i.e. 15-year fixed)

Loan to Value MIP Factor
Less than or equal to 90% (10% or more down) .45%
Greater than 90% (less than 10% down) .70%

MIP Calculations for Loan Terms Greater than 15 Years (i.e. 30-year fixed) for a Streamline, Simple Refinance of previous mortgage endorsed on or before May 31, 2009

Loan to Value MIP Factor
Less than or equal to 90% (10% or more equity) .55%
Greater than 90% (less than 10% equity) .55%

FHA mortgage insurance premiums in the Chicago market and throughout the rest of the country can be confusing. Please contact us for clarification on any UFMIP or MIP question you may have.