One of the distinguishing features of FHA loans is the requirement for Mortgage Insurance Premiums (MIP). Your FHA loan MIP involves two payments: an upfront premium and an additional annual payment. Understanding the upfront and annual MIP payments allows you to assess their impact on your monthly housing expenses. By including these costs in your budget planning, you can ensure your mortgage payments align with your financial goals.

Upfront FHA MIP

When you close on your FHA loan, you’ll pay an upfront MIP equal to 1.75% of the total loan amount. This amount can either be paid at Closing or added to your loan balance. For instance, if your loan amount is $150,000, your upfront MIP would be:

$150,000 * 1.75% = $2,625

Annual FHA MIP

Your annual Mortgage Insurance premium (MIP) varies depending on factors such as your loan-to-value ratio (LTV), Down Payment size, and loan term, but generally falls between 0.45% and 1.05% of your loan amount. Here’s how it works:

• Down Payment 10% or More: MIP payments are required for the first 11 years of the loan term.
• Down Payment Less than 10%: MIP payments continue for the entire life of the loan.

For loans with a term longer than 15 years and an LTV ratio over 90%, the annual MIP remains in effect for the duration of the loan. For loans with terms of 15 years or less and an LTV ratio of 90% or less, the annual MIP lasts for 11 years.

We typically include the annual MIP in your monthly mortgage payment. To determine your monthly MIP amount, divide your total annual MIP by 12.

Consultation with Cazle Mortgage

For personalized guidance on FHA loans and assistance in understanding MIP costs, contact our mortgage consultants at Cazle Mortgage. We’re here to help you navigate the complexities of FHA financing and make informed decisions about your homeownership journey.

Can You Remove PMI On FHA Loans?

No, Mortgage Insurance cannot be entirely removed from FHA loans unless the loan is refinanced into a conventional mortgage. Here’s how it works:

1. Upfront Mortgage Insurance Premium (UFMIP): This is a one-time fee paid at Closing and is non-refundable, even if you Refinance or pay off the loan early.
2. Annual Mortgage Insurance Premium (MIP): Paid monthly as part of the mortgage payment, this can last either for the entire loan term or be canceled after 11 years, depending on certain conditions:
   • If the loan was issued after June 3, 2013, MIP stays for the life of the loan if your Down Payment was less than 10%.
   • If you made a Down Payment of 10% or more, MIP can be canceled after 11 years.

How to Remove FHA Mortgage Insurance

The most common way to remove MIP from an FHA loan is to Refinance into a conventional loan, assuming you now have at least 20% Equity in the home. Conventional loans do not require Mortgage Insurance with sufficient Equity.

How to Remove MIPs

MIPs require more qualifications for canceling your insurance. One factor is your loan origination date:

• If your loan origination date falls between July 1991–December 2000, then you can’t cancel your MIP.
• If your origination date is somewhere between January 2001–June 3, 2013, your MIP will be canceled once you reach an LTV of 78%.
• If your loan origination date is after June 3, 2013, and you made a Down Payment of at least 10%, your MIP will be canceled after 11 years. If you didn’t make a Down Payment of at least 10%, then your MIP will only be canceled once your mortgage is paid in full.

If your MIP can’t be removed, then consider refinancing your FHA loan to a conventional loan when you can qualify to stop paying your MIP. If you would like to learn more about canceling your Mortgage Insurance or refinancing your loan, contact us today.