Oct. 26, 2012

MIP (Mortgage Insurance Premium) Calculator

MIP and your FHA Loan

Buyers here looking for houses in Nashville who are planning on putting less than 20% down and using an FHA loan your home purchase should be prepared for an additional annual expense that can be paid monthly called a Mortgage Insurance Premium (MIP) through Private Mortgage Insurance (PMI), also known as Principle Mortgage Insurance and Primary Mortgage Insurance, why, I have no idea, just go with it. At any rate, this is not an insurance to you but rather insurance protection for the bank (lender) paid BY you in case you stop making your payments and are foreclosed on.

In addition to the MIP, you are also required to pay a one time FHA Funding Fee called UFMIP (Up-Front Mortgage Insurance Permium) which is currently 1.75% of the Base Mortgage amount and can be paid in cash up front or it can be conveniently financed into the loan. Yes, they get you coming and going, but hey you only have to put down 3.5%!

Below is an easy way to calculate the MIP since most mortgage calculators online do not calculate this key proponent to your monthly mortgage expense. As a sidenote, if you have an Android phone, I've found a great little free mortgage calculator app called "Karl's Mortgage Calculator" that has PMI settings. I'm sure there's one floating around for iPhone's, but I'm an Android gal myself. Just be sure the mortgage calculator you use has settings for Principal, Interest, Taxes, Insurance (PITI) and Mortgage Insurance Premium. It would be nice if it also included the required UP-Front MIP calculation.  At any rate, if you want to do it the old fashion way, here you go:

I'm basing the following scenario on a $100,000 purchase price with the minimum required 3.5% down payment on a 30 year loan. There is a slight change in premium rates if you borrow more than $625,000 and/or put down at least 5% and/or finance at or under a 15 year term, but this scenario will cover the majority of borrowers. For a more specific quote based on your particular criteria, contact a mortgage banker like my mortgage partner Shelly Stewart with Southwest Funding at 615-854-4842.

Purchase Price: $100,000

Down payment: 3.5%

Term: 30 Years

 $100,000 - 3.5% = $96,500 This is your "Base Mortgage"
$96,500 + 1.75% = $98,188.75
This is the amount of your FHA Mortgage and what your payment (PI) will be figured on if you finance the Up-Front MIP
$96,500 x 1.25% = $1,206.25 This is your annual Mortgage Insurance Premium (MIP)
$1,206.25 / 12 = $100.52 This is your monthly MIP, which when added to the monthly Principal, Interest, Taxes and Insurance (PITI) gives you your total monthly payment.

 

I hope this helps clear up some confusion about the dreaded FHA Mortgage Insurance Premium. This information is based on the Mortgagee Letter 12-4 from the US Dept of HUD dated March 6, 2012.

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