The mortgage insurance payments required for FHA loans.
The mortgage insurance premium (MIP) and upfront mortgage insurance premium (UFMIP) are both mortgage insurance payments required on FHA loans. As a reminder: mortgage insurance (MI) is an additional (and mandatory, in the case of FHA loans) insurance policy that protects the lender.
FHA financing requires borrowers pay both an upfront mortgage insurance premium at closing and monthly mortgage insurance throughout the life of the loan.
The upfront mortgage insurance premium (UFMIP) is 1.75% of the base loan amount and is usually financed into the loan amount rather than paid out of the borrower’s pocket at closing.
Unlike conventional financing, the monthly mortgage insurance amount for FHA financing is at a set rate dependent upon property type and loan-to-value (LTV) ratio. In exchange for the ongoing mortgage insurance, FHA financing has less stringent qualification requirements (e.g., higher debt-to-income ratios, lower down payment requirements, etc.).