Mortgage Insurance Premium ( MIP ) Fees
Because FHA mortgage loans tend to be at higher loantovalue levels up to 96.5 % LTV , these governmentinsured loans will include a mortgage insurance premium fee when the LTV exceeds 80 % of the purchase price or appraised value for a refinance . The pooled insurance fee payments will act as future protection against any default risks .
Generally , the MIP funding fee equals 1.75 % of the loan amount that ’ s due at the time of closing . The official title for this MIP funding fee is the Upfront Mortgage Insurance Premium ( UFMIP ). Many times , the borrower can add this MIP finance charge to the loan amount if all underwriting guidelines are met and approved by the lender .
Additionally , there will be an annual mortgage insurance premium ( MIP ) fee that varies depending upon factors such as the loantovalue and loan amount size . Loans with a higher LTV range at 96.5 % are generally considered much riskier than loans with lower 90 % LTV ranges . As a result , the annual MIP fee percentage amounts will differ and range from a low of 80 basis points or . 80 % ( at or below 90 % LTV for loan amounts below $ 625,500 ) to as high as 105 basis points or 1.05 % ( at or above 95 % LTV for loans greater than $ 625,500 ).
Please note that 15year FHA mortgages generally have lower interest rates and much lower annual MIP fees to as low as 45 basis points or . 45 %.
Source : https :// www . hud . gov / sites / documents / 1501MLATCH . PDF
FHA Monthly MIP Payment Example
Let ’ s quickly review a fictional $ 600,000 home purchase deal for a borrower who wants an FHA mortgage that ’ s fixed for 30 years with the lowest down payment possible :
● Purchase price : $ 600,000
● Maximum 96.5 % LTV with just 3.5 % down : $ 579,000
● Upfront Mortgage Insurance Premium ( UFMIP ): $ 10,132.50 ( 1.75 % of $ 579,000 )
● Annual MIP fee : $ 4,921.50 (. 85 % of $ 579,000 )
● Monthly MIP fee paid : $ 410.12 ($ 4,921.50 / 12 months )
The monthly MIP fee is paid in addition to the homeowner ’ s principal , interest , property taxes , and homeowners insurance . The faster that the homeowner can eliminate this monthly MIP fee requirement , the more affordable the future monthly payments will become for the borrower .
Photo by bongkarn thanyakij from Pexels
50