Mortgage Insurance Example

An FHA Mortgage has both Upfront Mortgage Insurance and Monthly Mortgage Insurance.

Let’s review what this means as far as payment is concerned.

As of April 1st, 2013, the current Mortgage Insurance (MI) factors are 1.75% of the loan amount “upfront” and a monthly MI of 1.35%.

A $100,000 loan using 3.5% down ($3,500) leads to a $96,500 loan size.  FHA requires 1.75% be factored into the loan (upfront MI).  So you would take $96,500 and add in the 1.75% of that amount on top.   This leaves us with a new loan size of $98,188 including MIP. (1.75% of $96,500 = $1,688 therefore $96,500 + $1,688 = $98,188).

This explains the upfront mortgage insurance premium, but how does the monthly mortgage insurance payment get calculated?  Since the monthly mortgage insurance is based on a factor of 1.35% you simply take the loan amount of $96,500 and multiply it by 1.35%.  This leaves us with $1,302.75.  Since it is a “Monthly” charge that is paid with the monthly principal and interest, you divide this number by 12.  $1,302.75 divided by 12 = $108.56.

Your monthly mortgage insurance payment would be $108.56.

If you have any questions regarding Mortgage Insurance for FHA, USDA, VA, or Conventional loans, please feel free to contact us.

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