* Disclaimer – all information in this article is accurate as of the date this article was written *

The FHA Mortgage Insurance Premium is an important part of every FHA loan.

There are actually two types of Mortgage Insurance Premiums associated with FHA loans:

1. ** Up Front Mortgage Insurance Premium (UFMIP)** – financed into the total loan amount at the initial time of funding

2. ** Monthly Mortgage Insurance Premium** – paid monthly along with Principal, Interest, Taxes and Insurance

Conventional loans that are higher than 80% Loan-to-Value also require mortgage insurance, but at a relatively higher rate than FHA Mortgage Insurance Premiums.

Mortgage Insurance is a very important part of every FHA loan since a loan that only requires a 3.5% down payment is generally viewed by lenders as a risky proposition.

Without FHA around to insure the lender against a loss if a default occurs, high LTV loan programs such as FHA would not exist.

## Calculating FHA Mortgage Insurance Premiums:

**Up Front Mortgage Insurance Premium (UFMIP)**

UFMIP varies based on the term of the loan and Loan-to-Value.

For most FHA loans, the UFMIP is equal to 2.25% of the Base FHA Loan amount (effective April 5, 2010).

**For Example: **

>> If John purchases a home for $100,000 with 3.5% down, his base FHA loan amount would be $96,500

>> The UFMIP of 2.25% is multiplied by $96,500, equaling $2,171

>> This amount is added to the base loan, for a total FHA loan of $98,671

**Monthly Mortgage Insurance (MMI):**

- Equal to
**.55%**of the loan amount divided by 12 – when the Loan-to-Value is greater than 95% and the term is greater than 15 years

- Equal to
**.50%**of the loan amount divided by 12 – when the Loan-to-Value is less than or equal to 95%, and the term is greater than 15 years

- Equal to
**.25%**of the loan amount divided by 12 – when the Loan-to-Value is between 80% – 90%, and the term is greater than 15 years

- No MMI when the loan to value is less than 90% on a 15 year term

The Monthly Mortgage Insurance Premium is not a permanent part of the loan, and it will drop off over time.

For mortgages with terms greater than 15 years, the MMI will be canceled when the Loan-to-Value reaches 78%, as long as the borrower has been making payments for at least 5 years.

For mortgages with terms 15 years or less and a Loan -to-Value loan to value ratios 90% or greater, the MMI will be canceled when the loan to value reaches 78%. *There is not a 5 year requirement like there is for longer term loans.

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## Related Articles – Mortgage Approval Process:

**Basic Mortgage Terms****How Much Can I Afford?****Common Documents Required For A Mortgage Pre-Qualification****Top 8 Questions To Ask Your Lender During Application Process****What’s The Difference Between An Investment Property, Second Home and Primary Residence?****Seven Items Real Estate Agents Need To Know About Your Mortgage Approval**