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FHA Funding Fee & Monthly Mortgage Insurance

FHA logoANOTHER CHANGE!  Yes, it's that time of the year and HUD/FHA is making it harder to obtain an FHA mortgage. The Federal Housing Administration (a division of the Department of Housing and Urban Development is:

  • revising the period for assessing the annual MIP (Commentary: in other words, you may not be able to eliminate the monthly mortgage insurance premium)
  • removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination (Commentary: so it you have a substantial down payment or short loan term, you will not get any breaks from HUD); and
  • increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009 (see ML 2012-4.pdf).

Real estate agent with new home buyersThis page will attempt to explain the FHA loan calculation and the FHA monthly mortgage insurance premium (MIP) over the past few years. A more detailed explanation can be found on the FHA Funding Fee Explanation page.

The FHA loan program does not have a sales price limit, however, the Federal Housing Administration does set maximum loan amounts for each US county. The typical loan limit for a single family residence or condominium is $271,050, for two residential units (duplex), the loan limit is $347,000, three units, the limit is $419,425 and a four unit dwelling is $521,250

There are county exceptions. You can see the FHA loan limits for your county on the side bar below. You will be redirected to an ancillary web site.

The FHA requires applicants to pay in cash or finance a "funding fee" with the FHA loan. The amount of the "funding fee" has changed several time over the past few years. The applicant is also required to pay a monthly mortgage insurance premium (mip).

Calculating the FHA home loan can be a bit confusing, particularly with the numerous changes that have occurred over the past few years. The following chart illustrates the changes to the down payment, upfront mortgage insurance premium and monthly mortgage insurance premium (mip). (Also called pmi).

If the sales price exceeds the maximum loan amount, the down payment will have to increase. See the FHA jumbo loan calculation below.

You can also use the  Blinking arrow FHA Funding Fee & MIP Calculator to estimate the FHA loan amount and monthly mortgage insurance premium.

30 YEAR FHA MORTGAGE Prior to April 5, 2010 As of April 5, 2010 As of October 4, 2010 Effective April 18, 2011 Effective June11, 2012  
Sales Price $100,000 $100,000 $100,000 $100,000 $100,000  
X Down Payment Percentage 3% 3.50% 3.50% 3.50% 3.50%  
= Down Payment $ 3,000 $ 3,500 $ 3,500 $ 3,500 $ 3,500  
30 YEAR FHA FUNDING FEE
30 YEAR FHA MORTGAGE Prior to April 5, 2010 As of April 5, 2010 As of October 4, 2010 Effective April 18, 2011 Effective June 2012  
X FHA Funding Fee Percentage 0.0175 0.0225 0.0100 0.0100 0.0175  
Equals Funding Fee $ 1,697.5 $ 2,171.25 $ 965.00 $ 965.00 $1,688.75  
FHA MORTGAGE LOAN CALCULATION
30 YEAR FHA MORTGAGE Prior to April 5, 2010 As of April 5, 2010 As of October 4, 2010 Effective April 18, 2011 Effective June 11, 2012 Effective April, 1, 2013
Base Mortgage $ 97,000 $ 96,500 $ 96,500 $ 96,500 $ 96,500  
PLUS Funding Fee $1,697.50 $ 2,199.38 $ 965.00 $ 965.00 $1,688.75  
EQUALS FHA Mortgage $ 98,697.50 $ 98,671.25 $ 97,465.00 $ 97,465.00 $ 98,188.75  
Monthly FHA MIP Calculation
30 YEAR FHA MORTGAGE Prior to April 5, 2010 As of April 5, 2010 As of October 4, 2010 Effective April 18, 2011 See below See below
Sales Price $ 100,000 $ 100,000 $ 100,000 $ 100,000
Less Minimum Down Payment $ 3,000 (3%) $ 3,500 (3.5%) $ 3,500 (3.5%) $ 3,500 (3.5%)
BASE MORTGAGE $ 97,000 $ 96,500 $ 96,500 $ 96,500
X FHA MIP Percentage x 0050 X.0055 X.0090 X.01150
Annual FHA MIP Premium = $ 485.00 = $ 530.75 = $ 868.50 = $ 1,109.75
  divided by 12 months divided by 12 months divided by 12 months divided by 12 months
Monthly MIP Payment $40.42 $44.23 $72.38 $92.48

Monthly FHA MIP Calculation (JUNE 11, 2012)
30 YEAR FHA MORTGAGE 625,000 or less, AND 625,000 or less, AND Above 625,000, AND Above 625,000, AND
Down Payment Down payment LESS THAN 5%
(Minimum down payment)
Down payment GREATER THAN OR equal to 5% Down payment LESS THAN 5%
(Minimum down payment)
Down payment GREATER THAN OR equal to 5%
Sales Price $ 100,000 $ 100,000 $ 700,000 $ 700,000
Less Down Payment $ 3,500 (3.5%) $ 5,000 (5.0%) $ 24,500 (3.5%) $ 35,000 (5.0%)
BASE MORTGAGE $ 96,500 $ 95,000 $ 675,500 $ 665,000
X FHA MIP Percentage X.0125 X.0120 < a bit lower with more down payment X.0150 X.0145 < a bit lower with more down payment
Annual FHA MIP Premium = $ 1,206.25 = $ 1,140.00 = $ 10,132.59 = $ 9,975.00
  divided by 12 months divided by 12 months divided by 12 months divided by 12 months
Monthly MIP Payment $100.52 $95.00 $844.38 $831.25

30 Year Mortgage MIP - April, 1, 2013
Base Loan Amount Down Payment Percentage Effective Annual MIP
1. ≤ $625,500 Less than, and equal to 5% down payment   (≤ 95.00%) 4/1/2013 1.30%
2. ≤ $625,500 Greater than 5% down payment (> 95.00%) 4/1/2013 1.35%
3. > $625,500 Less than, and equal to 5% down payment (≤ 95.00%) 4/1/2013 1.50%
4. > $625,500 Greater than 5% down payment (> 95.00%) 4/1/2013 1.55%

MAXIMUM FHA LOAN CALCULATION

Hopefully, you have a better understanding of the FHA home loan and monthly mip calculation, but wait; that's not all. FHA loans have "maximum" loan amounts based on the US county! . . . and the maximum FHA loan limit increases based on the number of living units within the dwelling. You can view the FHA loan limits for your state with the links on the right. You will be redirected to an ancillary web site - but don't forget to bookmark this site. The following example assumes a sales price of one million dollars (jumbo FHA loan).

Multiply the sales price by the down payment percentage and subtract out the down payment from the sales price to arrive at the "base loan", however, if the loan amount exceeds the FHA loan limit, replace the base mortgage with the "maximum" FHA loan limit and subtract the limit from the sales price to arrive at the down payment.

Maximum FHA Loan Calculation
  Calculation - 1 Calculation - 2
Sales Price $100,000 One million dollars
Less Down payment Percentage (3.50%) $3,500 Maximum Mortgage Amount
Base Mortgage (1) $ 965,000 (2) $ 271,050

Subtract the LOWER of calculation 1 or 2 to arrive at the required down payment.

Sales Price $1,000,000
Less the minimum of (1) or (2) = $271,050
Equals down payment $728,950

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