How Much Is PMI For FHA Loans

by Megan
(Rhode Island)

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?
Megan continues... 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?

***zz-portrait-left.shtml*** Dear Megan,

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?"

Two reasons!
  1. 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.

  2. 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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Megan, one more thing. Is your question answered? If you have another question, I'd like to hear back from you.

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Best wishes,

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What is the average cost of PMI?
by: Anonymous

What is the average cost of PMI?

Kate here:
Starting in April 2012, FHA is increasing its annual mortgage insurance premium by .10 percent for loans under $625,500. For larger mortgages, by 0.35 percent. The base premiums vary due to loan type and the amount of down payment.

FHA upfront premiums usually financed into the mortgage will increase by a whopping 0.75 percent. The final result will be to 1.75 percent of the loan amount.

Private mortgage insurance premiums for conventional loans vary quite a bit depending on loan type, credit, down payment and a host of other criteria.

You can count on at least $30 and up to $90 (and sometimes more) for every $100,000 you borrow.

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You can also ask Kate about your mortgage at Ask Kate About Buying a House.

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