FHA Mortgage Insurance Premiums Explained (2017)

FHA loans offer a level of leeway when qualifying for a mortgage that conventional loans do not. That leeway comes with a price. Lenders are willing to take additional risks associated with lower down payments, lower credit scores, and higher debt-to-income ratios because FHA insures the loan. FHA insurance covers the lender's loss if a homeowner defaults.

1. Upfront Mortgage Insurance Premium (UFMIP)

FHA UFMIP is the easiest to understand. It is a lump sum premium that is financed into your FHA loan. FHA UFMIP is 1.75% of your FHA loan amount. Consider the following:

  • You are buying a $150,000 home and making the minimum 3.5% down payment ($5,250).
  • Your BASE FHA loan amount is $144,750 ($150,000 - $5,250).
  • FHA UFMIP is 1.75% of $144,750, which equals $2,533.
  • Therefore, your FHA loan amount will be $144,750 + $2,533 = $147,283.

As you can see, FHA UFMIP does not impact your cash needed to close or savings required to obtain an FHA loan. FHA UFMIP is financed into your FHA loan.

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2. Annual Mortgage Insurance Premium (FHA MIP)

Annual FHA MIP is a bit more confusing, and we won't bore you with minute details. Although, it's not terribly difficult to see how it impacts your FHA mortgage payment.

FHA MIP is calculated annually, but you pay it monthly as part of your FHA mortgage payment. The FHA MIP rate is determined by your loan term and down payment (see table below). Consider the following from our UFMIP example:

  • FHA MIP rate is 0.85% using the FHA MIP table.
  • Converting annual FHA MIP to monthly is done by multiplying the annual rate times the average principal balance over the next 12 months, backing out the UFMIP, and dividing the annual premium by 12. That's the complicated part.
  • The end result is an FHA MIP payment of $101.67.
  • Fortunately, our FHA Payment Calculator does the work for you.

Next: FHA Mortgage Payment Calculator

Appendix: FHA Mortgage Insurance Premium Table

► 30 year FHA loans & terms more than 15 years.

Loan amounts up to and including $625,500.

LTVMIP
≤ 90%0.80%for 11 years
> 90% ≤ 95%0.80%for 30 years
> 95%0.85%*The majority of FHA loans fall here: 0.85% UFMIP.for 30 years

Loan amounts more than $625,500.

LTVMIP
≤ 90%1.00%for 11 years
> 90% ≤ 95%1.00%for 30 years
> 95%1.05%for 30 years

► FHA loans less than or equal to 15 years.

Loan amounts up to and including $625,500.

LTVMIP
≤ 90%0.45%for 11 years
> 90%0.70%for 30 years
 

Loan amounts more than $625,500.

LTVMIP
≤ 78%0.45%for 11 years
> 78% ≤ 90%0.70%for 11 years
> 90%0.95%for 30 years

Source: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Mortgagee Letter 2017-07 dated January 20, 2017

More FHA Help

FHA mortgage insurance premiums are an essential piece of the overall housing market's health. FHA loans are possible because these premiums make mortgage loans available to more homebuyers.

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*All calculations on www.WhatsMyPayment.com are for demonstration purposes only.
Every effort is made to maintain accurate calculations for each program listed. Actual numbers may vary.

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What's My Payment, LLC and www.whatsmypayment.com are not affiliated with any government agency, nor do we originate mortgage loans.
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