How we calculate mortgage insurance (MI) on FHA loans to figure out a monthly MI payment.
What exactly is PMI or MI? You can view PMI a simple explanation for more clarification.
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 -
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 now these are the guidelines.
If you have a down payment less than 5% then your monthly MI factor is .0090 (This will increase soon). If you have 5% or greater down payment your monthly MI factor is .0085
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. UFMIP is equal to 1% 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 .0090 = 2,605.50. Divide by 12 = $217.13
The monthly FHA MI payment in this scenario would be $217.13 per month.
If the down payment is 5% or greater then use .0085 instead of .0090
Your loan amount wil 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%.
Apply UFMIP - Loan amount $289,500 X 1% (2,895) = $292,395. This is your new total loan amount.
Feel free to contact us with any mortgage related questions.
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