Frequently Asked Question: FHA / MIP / VA Funding Fee

Frequently Asked Question: FHA / MIP / VA Funding Fee

Q: Q: I am going over our Closing Costs Worksheet (for our preapproval) and I see "FHA/MIP/VA Funding Fee". What is this? Is this something that has to be paid at closing or can it be added into the loan?

A: FHA has a one-time upfront mortgage insurance premium (UFMIP) of 1.75% of the mortgage amount. If you are doing an FHA loan, you can either pay the UFMIP out of pocket or roll it into the mortgage. If you are doing a 15 year mortgage with less than 10% down or a 30 year mortgage regardless of the amount down, there is also a monthly mortgage insurance premium.

VA has a one-time funding fee that varies in amount, and depends on the type of veteran, the type of transactions, and whether or not it's a first time use. If you are doing a VA loan, you can either pay the VA Funding Fee out of pocket or roll it into the mortgage. With VA loans, there's no monthly mortgage insurance premium.

USDA has a one-time funding fee of 2.0% of the mortgage amount. If you are doing an USDA loan, you can either pay the funding fee out of pocket or roll it into the mortgage provided that the house appraises for at least 2% more than the purchase price or its value. With USDA loans, there's no monthly mortgage insurance premium.

If you are not doing an FHA or VA or USDA, then there is no funding fee or upfront mortgage insurance premium.