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FHA Mortgage Insurance
FHA has several kinds of Insurance funds. Depending on the type of
property and the type of loan transaction, one or more of these insurance types may apply. Mutual
Mortgage Insurance (MMI): Applies to 1-4 unit houses and
eligible PUD’s for both Fixed Rate and ARM transactions. (HUD program codes: 203b (fixed rate) and 251 (ARM). Within this MMI fund, there are 2
kinds of mortgage insurance that may apply to the transaction: Upfront MIP
and Monthly MIP:
- Upfront Mortgage Insurance (UFMIP) is the one time mortgage insurance premium collected at closing and is sent to HUD to insure the
loan. Currently, UFMIP is calculated at 1.75 % X the base loan amount.
Please note that this is to increase in the near 2010 future.
- UFMIP may be paid in cash at closing and may be paid by the Borrower,
Seller, or Lender.
- UFMIP may be financed in the mortgage amount. If financed, the UFMIP is added to the base loan amount to arrive at a greater “total”
loan amount.
- The total loan amount is the principal amount that the Borrower repays
in the mortgage payment each month. The total loan amount may exceed FHA’s statutory (locality) lending limit
only by the amount of the financed UFMIP.
- The Borrower may obtain a partial refund of the UFMIP if the loan is
refinanced to another FHA mortgage within the first 3 years of term. If
the loan is paid off and/or not refinanced to another FHA mortgage, there will be no refund of the
UFMIP.
ANNUAL PREMIUM (Monthly mortgage insurance):
- In addition to the UFMIP, monthly mortgage insurance will be charged
on all transactions where the term is more than15 years.
- Monthly mortgage insurance is paid monthly (included in the Borrower’s
monthly payment.) The amount charged will be determined by the LTV and the term of the loan.
If 15 years or less, and the LTV is under 90%, no monthly
premium. See Mortgagee Letter 00-38.
- Monthly MIP may be canceled prior to payoff of loan. (For 30-year loans, MIP must be paid for 5 years and then canceled when LTV
declines to 78%. For 15 year loans, MIP may be dropped when LTV reaches 78% - no specific number of payments must have been made.)
General Insurance Fund (GI):
- Applies to 1 Unit Condo properties. Loan transaction may be for both
Fixed rate and ARM products.
- HUD program code is Section 234c (Condo-Fixed Rate) OR Section 251 (Condo- Arm Loan).
- Monthly mortgage insurance is paid monthly in the Borrower’s mortgage
payment. Servicer sends the payment to HUD on monthly basis.
- Insurance is paid by Borrower for entire term of loan (regardless of the
LTV).
- Current monthly mortgage insurance is calculated by multiplying the base loan amount X .50% divided by 12.
- Borrower receives NO refund on this type of insurance when the loan is
paid in full.
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