For some interested in homebuying, an FHA loan is the only path to homeownership. FHA home loans have many advantages – but FHA loans come at a cost. Use MoneyGeek’s FHA Mortgage Insurance Calculator to learn how much you will be paying to the FHA for the privilege of borrowing a loan under the FHA program.
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How to Use the MoneyGeek FHA Mortgage Insurance Premium Calculator
All new FHA borrowers pay a premium into an insurance fund that reimburses lenders when a borrower goes into foreclosure. The insurance fund and promise of repayment backed by the U.S. government gives lenders the confidence to lend money to people who might not qualify for a conventional loan. There are two FHA mortgage insurance premiums new borrowers must pay. The first is a one-time, upfront premium. This is call the “Upfront Mortgage Insurance Premium” (UFMIP). The second is the ongoing, annual fee that’s calculated every year. As your loan balance falls, the annual premium is recalculated and decreases.
The calculator above shows you how much your UFMIP will be, and how much you can expect to pay during the first year of your loan. As mentioned, expect your annual amount due to decrease with each passing year.
|Input||What To Input|
|Home value||Enter the purchase price for your home. Because our calculator estimates your UFMIP and MIP, you can enter a round number here.|
|Loan Length (Years)||Most FHA loans are 30 years in length. However, your loan may vary, so enter the correct loan term here.|
|Down Payment||Enter how much you expect to give the lender as a down payment. The minimum for an FHA loan is 3.5%, and that is the typical amount FHA borrowers spend at closing.|
|Payments per year||Most loans are set up to be paid 12 times per year, due on the first of the month. However, the number of payments per year can vary.|
|Interest Rate||Enter the offered rate, and not the APR rate. APR is meant to show the effective cost of the loan, and does not apply to this calculator.|
|Output||What the Output Means|
|Upfront Costs||The mount you will be expected to pay in upfront insurance costs. In some deals, you can ask the seller to pay for your closing costs, but this varies by market and deal. This can be rolled into your loan balance.|
|Total Monthly Payment||A sum of your principal, interest, and mortgage insurance cost.|
|Monthly Mortgage Insurance Costs||How much of your mortgage payment goes to your mortgage insurance.|
How Much Does FHA Mortgage Insurance Cost?
FHA mortgage insurance involves two components: an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP).
The upfront premium is paid when the borrower gets the loan. The borrower doesn’t pay the fee immediately or in cash. Instead, the premium is added to the borrower’s loan amount. The current FHA upfront premium is 1.75 percent of the loan amount.
Here’s an example of how UFMIP is added to the loan:
with UFMIP included:
The down payment percentage is based on the loan amount without the UFMIP, so a minimum 3.5 percent down payment would still be $7,000, not $7,122.50.
|MIP (percentage of loan amount)||Monthly charge on $100,000 loan|
|Less than $625,500||Less than 5 percent||0.85||$71|
|Less than $625,500||More than 5 percent||0.80||$67|
|More than $625,500||Less than 5 percent||1.05||$88|
|More than $625,500||More than 5 percent||1||$83|
FHA’s Annual Mortgage Insurance Premium (MIP)
The annual premium is divided by 12, and that amount is added to the borrower’s monthly mortgage payment. This system means the borrower doesn’t have to pay the full amount all at once every year.
An individual borrower’s MIP can vary from less than $60 to several hundred dollars per month, depending on the borrower’s loan amount, loan term and down payment percentage. The borrower’s credit score doesn’t affect his or her MIP for FHA loans.
The monthly MIP calculation is complicated, so you should consult a mortgage professional for an FHA loan quote based on your situation.
FHA’s Mortgage Insurance Premium Through the Years
The FHA has changed its MIP multiple times in recent years. Each time the FHA raised its MIP, FHA loans became more expensive for borrowers. Each increase also meant some prospective borrowers weren’t able to qualify for or afford the higher monthly mortgage payments due to the MIP.
In January 2015, the FHA reversed course and cut its MIP to 0.85 percent for new 30-year, fixed-rate loans with less than 5 percent down. The FHA projected that this decrease would save new FHA borrowers $900 per year, or $75 per month, on average. The actual savings for individual borrowers depends on the type of property they own or purchase, their loan term, loan amount and down payment percentage.
Changes in FHA’s MIP apply only to new loans. Borrowers who’ve closed their loans don’t need to worry that their MIP will get more expensive later.