FHA Mortgage Insurance Breakdown
Unlike conventional loans, FHA mortgages require two forms of mortgage insurance premiums: 1. Upfront MIP (UMIP): A standard 1.75% fee charged on the loan amount at closing (usually financed into your mortgage balance). 2. Annual MIP: An annual insurance fee (typically 0.55% for 30-year loans with 3.5% down) divided into 12 equal monthly payments.
FHA Payment Breakdown Table ($300,000 Purchase Price)
| Down Payment | Base Loan | Upfront MIP (1.75%) | Total Financed | Monthly P&I (6.5%) | Monthly MIP (0.55%) | Total Monthly |
|---|---|---|---|---|---|---|
| 3.5% ($10,500) | $289,500 | $5,066.25 | $294,566.25 | $1,861.85 | $132.69 | $1,994.54 |
| 5.0% ($15,000) | $285,000 | $4,987.50 | $289,987.50 | $1,832.91 | $130.63 | $1,963.54 |
| 10.0% ($30,000) | $270,000 | $4,725.00 | $274,725.00 | $1,736.44 | $123.75 | $1,860.19 |
Formulas
\(\text{Down Payment} = \text{Home Price} \times \frac{\text{Down Payment \%}}{100}\) \(\text{Base Loan} = \text{Home Price} - \text{Down Payment}\) \(\text{Upfront MIP} = \text{Base Loan} \times 1.75\%\) \(\text{Total Loan Amount} = \text{Base Loan} + \text{Upfront MIP}\) \(\text{Monthly MIP} = \frac{\text{Base Loan} \times \text{Annual MIP \%}}{12}\)
Frequently Asked Questions
What is an FHA Loan?
An FHA loan is a home mortgage insured by the Federal Housing Administration. It is designed for low-to-moderate-income buyers and permits down payments as low as 3.5% with credit scores starting at 580.
What is FHA Mortgage Insurance Premium (MIP)?
FHA loans require both an Upfront Mortgage Insurance Premium (UMIP) of 1.75% of the loan amount (financed into the loan) and an Annual MIP (typically 0.55% per year divided into 12 monthly payments).
Can FHA mortgage insurance (MIP) be removed?
For borrowers who put down less than 10%, FHA MIP remains for the entire 30-year loan life. If you put down 10% or more, MIP cancels after 11 years.