What Is the Cost of PMI on an FHA Loan?

With the PMI FHA loans offer, you will usually end up spending more money than you wanted. While you do have to get mortgage insurance with an FHA loan, it is referred to as MIP instead of PMI. MIP stands for mortgage insurance premium. Many people would not be able to get a loan without the FHA, so the slightly higher MIP is still tolerable. Here are the basics of FHA loan mortgage insurance premiums.

Upfront Premium

When you get an FHA loan, you will be required to pay an upfront mortgage insurance premium. For purchase money mortgages and full-credit qualifying refinances, they require 1.75 to 2.50% of the loan amount. For a Streamline mortgage, it usually costs 1.5% of the loan amount. For an FHA Secure loan, the rate will be 3%. This is lumped in with closing costs and you can choose to put it into the loan if you want. Depending on how big your loan is, this can be a pretty large amount.

Monthly Premium

On top of the upfront premium, you will also have to pay a monthly premium. This payment works out to .55% of the loan. In order to calculate how much will be added to your monthly payment, take the total loan amount times .0055. Then take that number and divide it by 12 months and you will have the amount that you are paying each month.

blog comments powered by Disqus