January 7, 2016
When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP.
“Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.”
There are exceptions as found in HUD 4000.1:
–Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009
–Hawaiian Home Lands (Section 247)
–Indian Lands (Section 248)
How is the UFMIP calculated? “The UFMIP charged for all amortization terms is 175 basis points (bps), unless otherwise stated in the applicable Programs and Products or in the MIP chart.” The chart mentioned here is available on the FHA/HUD official site as part of HUD 4000.1 Section II Part A under “Allowable Mortgage Parameters”.
FHA loan rules also add that the UFMIP must be “entirely financed into the Mortgage or paid entirely in cash. Any UFMIP amounts paid in cash are added to the total cash settlement requirements.”
Are refunds available on UFMIP? Not except in certain cases involving FHA refinances. “The UFMIP is not refundable, except in connection with the refinancing to a new FHA-insured Mortgage” which could be Streamline or cash-out/no-cash-out FHA refinance loans.
UFMIP payments cannot be considered part of the borrower’s down payment–the 3.5% minimum down payment requirement is a completely separate expense from MIP, UFMIP, closing costs, etc.
The other type of payment–Mortgage Insurance Premium or MIP–is different than the Up Front Mortgage Insurance Premium. HUD 40001. describes it as follows:
“The periodic MIP is an annual MIP that is payable monthly. The amount of the annual MIP is based on the LTV ratio, Base Loan Amount and the term of the Mortgage.” How is this premium calculated? “The MIP rate and duration of the MIP assessment period vary by mortgage term, Base Loan Amount, and LTV ratio for the Mortgage, as shown in the MIP chart” found in HUD 4000.1.
Remember, UFMIP and MIP payments are not the same thing as Private Mortgage Insurance, also known as PMI. Ask your lender about PMI rqeuirements as they may or may not apply to your mortgage loan transaction.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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