What is the Mortgage Insurance Premium on an FHA Loan?
FHA mortgages are a great option for those consumers who may not have a large down payment or might have challenging credit or both. Where conventional mortgages are offered as low as 620, FHA mortgages will lend to a credit score of 580 with as little down as 3.5%.
The Federal Housing Administration (FHA) is able offer this type of program, but you must pay an extra cost of the monthly mortgage insurance premium. When you close on a FHA mortgage you will have an upfront mortgage insurance fee of 1.75% of the mortgage amount along with a recurring, monthly cost. The upfront premium can be rolled or added back into the loan amount.
Unlike mortgage insurance paid on a conventional mortgage where the premium will drop off based on certain equity levels, FHA mortgage insurance is there for the life of the loan. The only way to remove it is to refinance the mortgage to a conventional offering.
The amount of your monthly mortgage insurance premium is higher with a 30-year fixed loan than a 15-year fixed loan.
FHA mortgages are a very good option for a lot of first-time homebuyers and an easier way to gaining home ownership. Consult with you trusted mortgage expert at Hall Financial so you can learn more about your options based on your situation.