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Nevin Williams

How To Calculate FHA Mortgage Insurance

Friday, September 5, 2014 - Article by: Nevin Williams - Sierra Pacific Mortgage - Message

How to Calculate FHA Mortgage Insurance ( FHA MI) What you will need:

  • A standard calculator
  • A piece of paper/pen
  • A little patience
  • An understanding of MI factor
  • An understanding of UFMIP

Here is the formula for loans with terms greater than 15 years - Loan amount multiplied by to monthly MI factor divided by 12 equals your monthly MI payment. MI factor is the number used to calculate the sum.

FHA rules change but as of January 2014 these are the guidelines. If you have a down payment less than 5% then your monthly MI factor is 1.35%. If you have 5% or greater down payment your monthly MI factor is 1.30% UFMIP is a one-time payment to FHA. It stands for Up Front Mortgage Insurance Premium.

Easy way to think of it is similar to buying or leasing a car. You put a down payment and then have monthly payments. Currently UFMIP is equal to 1.75% of the loan amount.

Hypothetical scenario: Purchase price $300,000 - 3.5% down payment ($10,500) = $289,500 loan amount Base loan amount - $289,500 X 1.35 = 3,908.25. Divide by 12 = $325.69 The monthly FHA MI payment in this scenario would be $325.69 per month. If the down payment is 5% or greater then use 1.30 instead of 1.35.

Your loan amount will be different. This is because in addition to the monthly MI payment FHA also charges a one-time Up Front Mortgage Insurance Premium of 1.75%. Apply UFMIP - Loan amount $289,500 X 1.75% (5,066) = $294,566. This is your new total loan amount. You can pay the UFMIP at closing so that it is not financed into the loan amount. You must pay it all or finance it all. FHA does not allow you to reduce it partially.

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