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FHA Mortgage - PMI

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Anonymous
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FHA Mortgage - PMI

I understand that the FHA program requires an upfront mortgage insurance payment of 1.75% of the loan amount that can be rolled into the principal of the loan if desired.  I also understand that there is a monthly mortgage insurance aspect to the FHA loan that must be paid until you reach a 78% of the LTV where the value is calculated as the original purchase amount.

 

My question is how to calculate the monthly mortgage insurance amount.  There is available information on the internet on calculated PMI for conventional loans but I have yet for find the formula for FHA mortgage insurance.  Can anyone help?

Message 1 of 8
7 REPLIES 7
ShanetheMortgageMan
Super Contributor

Re: FHA Mortgage - PMI

Monthly MI on FHA is required to be paid for at least 5 years and you need a 78% LTV or less, both must be met.

 

If you are doing a term longer than 15 years, and the LTV is 95% or less, then the monthly MI is .5% of the base loan amount per year, and then the monthly payment is divided over 12 months.  If the LTV is over 95% then the MI is .55%.  So on a $100k loan amount that'd be $500 or $550/year of MI (depending on the LTV), or $41-45/mo.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 8
Anonymous
Not applicable

Re: FHA Mortgage - PMI

If you begin with the minimum 97.5% LTV and have the 0.55% annual MI rate, can you reduce it when you reach a 95% LTV, or are you stuck with the 0.55% MI rate until you reach 78% LTV and 5 years?
Message 3 of 8
ShanetheMortgageMan
Super Contributor

Re: FHA Mortgage - PMI

Until you reach 78% and assuming you'd be paying it for 5 years - it would drop off.  However the LTV is based on the original value, can't use the current value - so plan on paying the monthly MI for 10-12 years.  The MI % rate doesn't get reduced to .5% from .55% when you get to 95% LTV either - the rate is constant the entire time.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 8
Anonymous
Not applicable

Re: FHA Mortgage - PMI

Thanks alot for your help Shane, one last question on this issue.

 

The LTV ratio is calculated based on the agreed upon purchase price vs. the loan amount correct?  My question is if I am rolling the upfront MI cost into the loan, does that count towards my LTV ratio?  And also, does my 0.0055 MI multiplier apply to the rolled in MI cost, or only to the purchase price minus the down payment amount?

 

Example:

Purchase Price: $400,000

Down Payment: 3.5% = $14000

LTV = 96.5%

Upfront MI Cost = $6755 (1.75% * $386K) - Roll this into loan principal

Loan Amount = $392,755

Monthly MI Cost = $180 (0.55% * $392,755 / 12 Mo)

 

Let me know if my numbers look correct, thanks again.

 

Message 5 of 8
ShanetheMortgageMan
Super Contributor

Re: FHA Mortgage - PMI

Yes the LTV is based on the base loan amount (since FHA has the UFMIP there is a base loan amount and then a base loan amount + UFMIP, it's only the base loan amount for the LTV calculation on FHA though) vs. the home's value.  On a purchase the home's value is the lower amount between the appraisal & sales price.  The monthly MI is only calculated on the base loan amount, not the base loan amount + UFMIP amount combined.  In your example it'd be a monthly MI amount of $176.91.

 

Welcome, my pleasure.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 8
Anonymous
Not applicable

Re: FHA Mortgage - PMI

Can that monthly PMI be rolled in as well as the up-front mortgage insurance?  The benefit for conventional loans when doing that is for the tax benefits and to reduce the monthly payment.

Message 7 of 8
Anonymous
Not applicable

Re: FHA Mortgage - PMI

Monthly PMI can not be "rolled in".  It is a separate item in your monthly escrow amount. 

Message 8 of 8
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