Buying a home is an exciting milestone but it also involves many complicated financial calculations. One extra fee to factor in upfront with certain mortgages is the upfront mortgage insurance premium also called the UFMIP. This article will explain what it is, when it applies and how to use an upfront mortgage insurance premium calculator to estimate your costs.
What Is the Upfront Mortgage Insurance Premium?
The upfront mortgage insurance premium (UMIP) is a one-time fee charged on most Federal Housing Administration (FHA) loans. It is 175% of the base loan amount and must be paid at closing
For example, on a $200,000 mortgage, the upfront premium is $3,500 (1.75% of $200,000). This fee is on top of your down payment and closing costs.
The UFMIP helps fund the FHA mortgage insurance program. It protects lenders in case a borrower defaults on their FHA loan. Most conventional loans don’t charge this fee unless you put less than 20% down.
On FHA Streamline Refinances, the UFMIP rate drops to 0.01%. Some borrowers may get credits from their old UFMIP premium applied to a new FHA loan.
When Do You Have to Pay the Upfront Mortgage Insurance Premium?
Any borrower taking out a new FHA mortgage must pay for mortgage insurance upfront The UFMIP applies on
- FHA purchase mortgages
- FHA cash-out refinances
- FHA Streamline refinances (0.01% rate)
Down payment size does not affect the rate. Even if you put down 20%, the UFMIP still applies on FHA loans.
Conventional loans avoid this fee with a down payment of at least 20%. Other government loan programs like VA and USDA loans don’t charge UFMIP.
How Is the Upfront Premium Paid?
You can pay your 1.75% UFMIP in two ways:
In cash at closing – Paying cash increases your closing costs. But you won’t pay interest on the fee over your mortgage term.
Financed into your mortgage – Rolling the UFMIP into your loan avoids out-of-pocket costs now. However, you pay interest on the fee over the life of your mortgage, raising total costs.
Paying cash may take more money upfront but saves on total interest paid over the long run. Financing spreads costs out but results in higher lifetime costs.
Use Our Upfront Mortgage Insurance Premium Calculator
Figuring out your UFMIP manually involves multiplying your mortgage amount by 1.75%. Doing math in your head can cause errors. Get an instant estimate by using our upfront mortgage insurance premium calculator below:
{insert upfront mortgage insurance premium calculator here}
This easy tool lets you input your expected mortgage amount, then it automatically calculates your estimated UFMIP fee. See the premium update in real-time as you adjust the loan amount.
Our calculator works for FHA purchase and refinance loans. It even includes the lower 0.01% rate for FHA streamline refinances.
For quick estimates on the go, bookmark this upfront mortgage insurance premium calculator on your phone.
Tips to Minimize or Avoid the Upfront Mortgage Insurance Premium
No one likes extra fees, so here are some ways to reduce or skip the UFMIP altogether:
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Conventional loan – Conventional mortgages don’t charge UFMIP if you put down 20% or more.
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Second mortgage – A piggyback loan, like an 80% first mortgage plus a 10% second mortgage, avoids MI.
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Seller financing – Ask the seller to finance a portion of the purchase price privately.
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Mortgage credit certificates – MCCs can credit you back for some MI costs.
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FHA Streamline Refinance – UFMIP drops to 0.01% of your balance for Streamlines.
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Apply UFMIP credits – If refinancing an FHA mortgage within three years, ask about premium credits.
The UFMIP is not avoidable on most FHA loans. But shop around for quotes and explore ways to minimize it. Our upfront mortgage insurance premium calculator helps you estimate the fee.
The Takeaway
The upfront mortgage insurance premium is an extra 1.75% fee charged on FHA loans. Use our handy calculator to estimate your UFMIP costs when buying or refinancing with an FHA mortgage. This tool gives you the information needed to budget for your upfront premium.
While the UFMIP does add costs, keep in mind the big picture. FHA loans help borrowers with lower credit or incomes buy a home sooner. The mortgage insurance premiums support programs that serve this important purpose.
FHA Mortgage DetailsHome Value
| Monthly Principal & Interest | $1,054.20 |
| Monthly Extra Payment (from Oct 2013) | $0.00 |
| Property Taxes | $208.33 |
| Homeowners Insurance | $58.33 |
| MIP (till Oct 2019) | $136.71 |
| HOA Fees | $0.00 |
| Total Monthly Payment | $1,457.57 |
| Down Payment & One-time Expenses | $13,000.00 |
| Principal (includes UFMIP) | $196,377.50 |
| Extra Payments | $0.00 |
| Interest | $183,133.38 |
| Taxes, MIP, Insurance & Fees | $145,215.00 |
Wanna print OR share a custom link to your FHA mortgage calculation (with all your numbers pre-filled)?
First time homebuyers, more than any class of homeowners, tend to be cash poor. That’s not a judgement statement — we all start somewhere. However, compared to other loans, FHA is much more forgiving of your liquidity-related woes. Many buyers find that they can become homeowners much faster with an FHA loan than with a traditional loan because of the low down payment and small reserve requirements. They can also choose to have up-front mortgage insurance rolled into the loan.
Using the FHA Mortgage Calculator
You can use this calculator to figure out your FHA mortgage payment every month or every two weeks, which includes the Upfront Mortgage Insurance Premium (UFMIP) and the Annual Mortgage Insurance Premium (MIP). It also helps you figure out how much owning a home will cost you over the life of the loan by including one-time costs like closing costs, furniture, and so on. ) and recurring costs such as property taxes, homeowner’s insurance and HOA fees. Here are some important points that you should be aware of:
- There are different FHA loan limits across the country for single-family, two-family, three-family, and four-family homes. You should look up the FHA loan limits for each county in your state and enter the home’s value based on those limits.
- Currently, FHA mandates a minimum 3. 5% down payment towards your house. Historically, it has been 3%.
- With conventional loans, FHA requires one-time UFMIP and recurring MIP, which is like private mortgage insurance (PMI). The amounts depend on the loan-to-value (LTV), your credit score, the length of the loan, whether you are refinancing or purchasing, and other factors. It’s hard to figure out how much an MIP is worth and how long it lasts because the rules have changed over the years. This tool thinks that the Upfront MIP is added to the mortgage. If you are trying to figure out the mortgage payments for an FHA loan that you took out earlier, you may need to change the defaults that the calculator gives you.
- You can look for FHA Approved condos that meet FHA requirements if you want to buy a condo.
How to Calculate a Mortgage Insurance Premium : Explaining Mortgages
FAQ
How is upfront mortgage insurance premium calculated?
How do I calculate my mortgage insurance premium?
How much should mortgage insurance premium be?
Can you pay mortgage insurance premium up front?
What is an FHA upfront mortgage insurance premium (UFMIP)?
An FHA loan’s upfront mortgage insurance premium (UFMIP) is also known, simply, as an upfront premium, and it will cost 1.75% of your loan amount. You’ll pay an ongoing MIP as well, as part of your monthly mortgage payment. The best way to avoid UFMIP is to tap into a conventional mortgage.
What is an upfront mortgage insurance premium?
An upfront mortgage insurance premium reduces the risk a lender takes on by accepting a smaller down payment. This premium is required for borrowers with an FHA loan, in addition to monthly mortgage insurance for 11 years with a down payment of 10% or more or throughout the life of the loan with a down payment less than 10%.
What is upfront mortgage insurance premium (MIP)?
Upfront mortgage insurance premium (MIP) is required for most of the FHA’s Single Family mortgage insurance programs. Lenders must remit upfront MIP within 10 calendar days of the mortgage closing or disbursement date, whichever is later.
What is a mortgage insurance premium (MIP) calculator?
Have a look and see how we’re doing! This Federal Housing Administration (FHA) mortgage insurance premium (MIP) calculator accurately displays the cost of mortgage insurance for an FHA-backed loan. Unlike most private mortgage insurance (PMI) policies, FHA uses an amortized premium, so insurance costs change along with your loan amount.