February 10, 2017
Is the FHA Up Front Mortgage Insurance Premium or UFMIP refundable? A reader got in touch with us in the comments section this week to ask us a question in that area:
“Is there any return of the UFMIP when refinancing out of an FHA loan to conventional? If so, what is the proration amount or percentage of fees refunded? over 6 months, 12 months, 18 months, 24 months?”
This insurance premium on FHA mortgages is refundable under a specific set of refinance loan circumstances, but not for all loans. FHA loan rules in HUD 4000.1 address the issue directly; on page 156 we learn the following:
“The UFMIP is not refundable, except in connection with the refinancing to a new FHA-insured Mortgage.”
HUD 4000.1 states that Up Front Mortgage Insurance Premiums on FHA mortgage loan transactions are standard. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage.”
Many borrowers also want to know if this insurance requirement is factored into calculating mortgage loan limits and loan-to-value limits. HUD 4000.1 states, “The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.”
Additionally, the amount 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 “basis points” mentioned here are calculated as one basis point=0.01%.
FHA loan rules permit financing of the Up Front Mortgage Insurance Premium, but it must either be fully added to the loan amount or paid entirely in cash. Page 155 of HUD 4000.1 codifies this, stating:
“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. However, if the UFMIP is financed into the Mortgage, the entire amount is to be financed except for any amount less than $1.00. The mortgage amount must be rounded down to the nearest whole dollar amount, regardless of whether the UFMIP is financed or paid in cash.”
Speak to a loan officer to discuss specific amounts of your mortgage insurance or other questions you may have about mortgage insurance premiums.
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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