How much is FHA mortgage insurance?

Stack of moneyOne of costs with an FHA mortgage is the mortgage insurance premium. The FHA mortgage insurance premium is used to support the FHA home loan program. Every home buyer (or homeowner who is refinancing) pays an upfront cost. The FHA premium has changed over the years. You can see the cost of the FHA mortgage insurance premium over the years with this link - FHA mortgage insurance & funding fee.

The FHA does not lend money directly to the borrower, but works with approved lenders. The mortgage lenders must follow the generous FHA lending guidelines. Needless to say, some homeowners fall into foreclosure. The FHA reimburses the lender a percentage of the loss. The reimbursement is provided by the mortgage insurance premiums that all borrowers pay. After the foreclosure proceedings, the Federal Housing Administration (FHA) takes title to the home and offers the foreclosed home for sale. The FHA foreclosures are often called HUD houses.

The mortgage insurance is either financed with the loan amount or paid in cash. The mortgage insurance is also called the FHA funding fee, because that is the purpose of the cost.

Here's how the FHA funding fee is calculated

Currently, the upfront FHA funding fee is 1.75% of the "base" mortgage.

30 Year FHA upfront mortgage insurance example
1. Sales price $ 200,000
2. Less down payment (3.5%) $ 7,000
3. Base mortgage = $ 193,000
4. Funding fee percentage X 1.75%
5. Funding fee cost $3,377.50

It should be noted that there are maximum lending limits with the FHA loan. An additional down payment is required when the "base" mortgage exceeds the lending limit for the US county where the home is located. Loans that exceed the lending limit are called jumbo FHA mortgages.

The FHA also charges a monthly mortgage insurance premium (MIP)

In addition to the upfront FHA premium, the FHA also charges a monthly mortgage insurance cost (MIP). The monthly cost is often referred to as PMI. Unlike the one cost fits all for home buyers, the monthly cost changes based on down payment or equity in the case of a refinance, loan amount, and the length of the mortgage term.

Here's how the monthly mortgage insurance is calculated

30 Year Fha monthly mortgage insurance example
Sales price $ 200,000
Less down payment $ 7,000
Base mortgage = $ 193,000
 
Base mortgage Monthly MIP Percentage   Annual MIP Cost Divided by 12 months Monthly Cost
$ 193,000 X .85% = $ 1,544.00 / = $ 136.71

Frequently asked questions about FHA home loans
1. Are FHA loans assumable?

2. Are FHA loans good?

3. Are FHA loans only for first time home buyers?

4. Are there disadvantages of the FHA Home Loan?

5. Can a FHA loan be used for mobile home?

6. Can FHA loans have a cosigner?

7. Can I qualify for an FHA loan?

8. Can the down payment on FHA be a gift?

9. Can FHA down payment be a gift?

10. Can the lender pay my closing costs?

11. Can FHA loans be refinanced?

12. Can I buy foreclosure with FHA loan?

13. Can I get an FHA loan with bad credit?

14. Do FHA loans have points?

15. Do FHA loans require pmi?

16. Does the FHA allow seller rent back?

17. Does the FHA require cash reserves?
18. Can you remove pmi from an FHA loan?

19. Do FHA loans require pmi?

20. Do FHA loans require mortgage insurance?

21. Does FHA require collections to be paid off for a borrower to be eligible for FHA financing?

22. Does the FHA require termite inspection?

23. How do you know if a condo is FHA approved?

24. How many FHA loans can you have?

25. How much is the FHA down payment?

26. How To Stop An FHA Foreclosure

27. Is there an FHA inspection?

28. What are the benefits of an FHA mortgage?

29. What is the debt to income ratio for FHA loans?

30. What is the difference between conventional and FHA home loans?

31. What is the Federal Housing Administration?