# What is FHA mortgage insurance?

ANOTHER 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).

This
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 FHA mortgage insurance calculator to estimate the FHA loan amount, down payment, 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 |