How we calculate mortgage insurance (MI) on FHA loans to figure out a monthly MI payment.
View "What exactly is PMI, MI or MIP? " for more info.
What you will need:
A standard calculator
A piece of paper/pen
A little patience
An understanding of MI factor
An understanding of UFMIP
Here is the formula -
Loan amount multiplied by to monthly MI factor divided by 12 equals your monthly MI payment.
MI factor is the number used to calculate the sum. FHA rules change but as of March 2012 these are the guidelines.
If you have a down payment less than 5% then your monthly MI factor is 1.15 (This will increase April 9th). If you have 5% or greater down payment your monthly MI factor is 1.10
UFMIP is a one time payment to FHA. It stands for Up Front Mortgage Insurance Premium. Easy way to think of it is similar to buying or leasing a car. You put a down payment and then have monthly payments. Currently UFMIP is equal to 1% of the loan amount. April 9th it will increase to 1.75%.
Hypothetical scenario:
Purchase price $300,000 - 3.5% down payment ($10,500) = $289,500 loan amount
Base loan amount - $289,500 X 1.15 = 3,329.25. Divide by 12 = $277.44
The monthly FHA MI payment in this scenario would be $277.44 per month.
If the down payment is 5% or greater then use 1.10 instead of 1.15 (April 9th this will increase by .10 for both scenarios).
Your loan amount wil be different. This is because in addition to the monthly MI payment FHA also charges a one time Up Front Mortgage Insurance Premium of 1%. (Increases to 1.75% on April 9th 2012)
Apply UFMIP - Loan amount $289,500 X 1% (2,895) = $292,395. This is your new total loan amount.
Feel free to contact us with any mortgage related questions.
Did you know MI is required even with a 20% down payment on some loans? MI, PMI are both known as mortgage insurance but do have differences. Find out why in this video.
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