How Much Is PMI For FHA Loans
Ask Kate how much is PMI for FHA loans: Hello Kate, I was wondering if different FHA mortgage lenders charge different PMI rates. Or do they determine them in the same manner?
I am currently waiting to hear on my bid on a short sale property. I bid full asking price of $229,900.
My lender has informed me that I will need PMI as I am only putting down 3.5% through FHA. The total monthly PMI would be $203.
Would my private mortgage insurance be different elsewhere and is this number ball park? It seems high to me!
BOO to PMI, Megan
Kate Answers: How Much Is PMI For FHA Loans?
I love your sense of humor -- "BOO to PMI
One thing I can guarantee (which does not often happen) is that all lenders determine FHA mortgage insurance premiums the same way.
This is because the Federal Housing Administration (FHA) establishes the calculations.
Two Types Of FHA Mortgage Insurance
The Federal Housing Administration, commonly called FHA, collects two types of mortgage insurance.
- Up Front Mortgage Insurance Premium (UFMIP)
- Monthly Mortgage Insurance Premium (MIP)
The upfront sum is most commonly financed into the loan amount. As this article is being written, the alternative is to pay it in cash. Since most FHA borrowers use a minimal down payment, financing the premium makes sense.
The other portion of your MI is included in your monthly house payments, along with principal and interest, property taxes and homeowner's insurance.
Then Why Is Mom's Mortgage Insurance Lower Than Mine
The amount you pay for FHA mortgage insurance may differ from your relatives or co-workers. I can hear you grumbling, "But Kate, you just said FHA sets the amounts! How can they be different?
- FHA is obligated to maintain a 2 percent reserve. So the percentages used to calculate mortgage insurance premiums are occasionally increased or decreased (on mortgages not yet funded) to adjust the capital reserve accordingly.
- Premiums are also based on individual criteria as established by FHA, for example, down payment, loan amount, and length of the mortgage term.
So if your friend got an FHA home loan last year and you are getting one this year, your premiums could be higher (or lower) depending on the above factors.
But rest assured the factors determining your
FHA mortgage insurance premiums are set in stone, once you get your loan. They are also the same, no matter which lender originated your mortgage.
You can learn more about FHA mortgages on my website. Go here to FHA Home Loans
for the beginning of my series. Follow the links, moving from page to page until you arrive at FHA Refunds - Does FHA Owe You Money
. (That caught your attention, right?)
While no one wants to shell out money for mortgage insurance, I AM happy that FHA exists and still allows such a minimal down payment to promote homeownership.
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