All mortgages backed by the Federal Housing Administration (FHA) have mortgage insurance. If you are planning to finance a home with a FHA mortgage, you will be responsible for paying the mortgage insurance.
Upfront and Annual Mortgage Insurance
FHA mortgage insurance is typically paid in two separate fashions, which can be confusing to borrowers. The first is an upfront payment, which is pretty standard across the board.
Most borrowers will pay 1.75% of the base loan amount. In other words, if your loan is for $300,000, your upfront insurance premium will be $5,250.
The second is an annual mortgage insurance premium (MIP) and this amount can vary based on loan terms and loan amounts.
The rates are also subject to change year to year — and fluctuate based on what is going on politically and economically.
In an effort to help you understand what your annual mortgage insurance payment will be, we’ve created some 2019 annual FHA MIP charts.
How Much Will My Insurance Premium Be?
The interest rate used to calculate your MIP is based on two primary factors: the loan amount and the loan-to-value (LTV) ratio. The rates are divided into two main buckets, loans longer than 15 years and loans shorter than 15 years.
Use the charts below to calculate an estimate of what your annual mortgage insurance premium will be.
FHA Loans Greater Than 15 Years
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For example, if your home’s purchase price is $700,000, and you put 5% down ($35,000), you are taking a loan for $665,000 and you have a LTV equal to 95%. This puts you in the third row. Therefore your MIP rate will be 1%, or $6,650/year.
FHA Loans Less Than or Equal to 15 Years
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We will use the same example here with a loan of less than 15 years. If your home’s purchase price is $700,000, and you put 5% down ($35,000), you are taking a loan for $665,000 and you have a LTV equal to 95%. This puts you in the third row. Therefore your MIP rate will be 0.95%, or $6,317/year.
How Long Do I Have to Pay My Insurance Premium?
Depending on when you secured your FHA backed loan, you may have to pay the mortgage insurance for life. If you are one of the lucky ones, you can get rid of it sooner. Below are some charts that outline when you can stop paying the FHA mortgage insurance.
The cut-off date that determines which category you fall into is June 3, 2013. If you are before this date you have certain criteria, and if you are after this date you have different criteria.
If you got your loan prior to June 3, 2013:
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If you got your loan after June 3, 2013:
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You can always call your loan servicer to inquire about the specifics on your loan, but these charts provide a general guideline of what you can expect.
If you’re evaluating financing options for an upcoming home purchase, finding an experienced, local real estate agent is a good first step.
Agents can provide invaluable guidance throughout the home-buying process — and that includes making recommendations on mortgage types and lenders that align with your financial circumstances and goals.
Fill out our online form and get connected with a top-rated, local agent near you for a free, no-obligation consultation!