Do we have to pay mortgage insurance premium?

Posted On: September 2011

ASK AN ILLINOIS LOAN OFFICER, WITH JOHN FOLAN

Editor: Tiffany Brewington

Q: Do we need to pay a monthly mortgage insurance premium (MIP) or private mortgage insurance if we don't have 20% down or 20% equity in our home?

A: No, through some unique programs you can refinance your home with no mortgage insurance premium (MIP) on FHA loans, or with no private mortgage insurance (PMI) on conventional loans. You may be able to buy a home with as little as 3.5% down, and not have to pay any monthly mortgage insurance premium, which could potentially save you hundreds of dollars per month. See calculations below and call me to find out how to avoid PMI.

John Folan is an Illinois Licensed Loan Officer. Have a mortgage question? Please write to john.folan@anbdc.com or call him at 630.932.8700

"MIP" Is Issued With FHA Loans Only

(Anything posted on this page is subject to change without notice)

The following are tables of the upfront MIP and monthly
mortgage insurance percentages for FHA home loans.

For 15 year loans originating after April 1, 2010

Upfront MIP

Down Payment

Monthly MI

2.25%

4.99% or less

0.50%

2.25%

5% to 10%

0.50%

2.25%

10.01% or more

0%

For 30 year loans originating after April 1, 2010

Upfront MIP

Down Payment

Monthly MI

2.25%

4.99% or less

0.50%

2.25%

5% to 10%

0.50%

2.25%

10.01% or more

0.50%

- A Calculation Example –

You need to borrow $100,000, want a 30 year loan,
and will be putting down 5% of the selling price.

(The Solution)

To calculate the monthly Mortgage Insurance Premium fee,
you will first need to calculate your "Up Front Premium" ....

a. Look at the "30 year loan" table, and locate the
percentage of the up front premium you will pay.

(In this example, it is 2.25%)

b. Multiply $100,000 (your loan amount ) by 2.25%

$100,000 x .0225 = $2,250

Your "Up-Front" MIP premium is $2,250
(It can be financed into your loan too!)

Now you will calculate the amount of the
"monthly" premium you will pay....

c. Multiply $100,000 (your loan amount ) by 0.50%

$100,000 x .005 = $500

d. Divide $500 by 12 (months) = $41.67

Your premium is $41.67 per month

Posted On: September 2011

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