FHA Mortgage Insurance (MMI)           

In a similar fashion to conventional home loans, FHA insured mortgages require mortgage insurance.  The mortgage insurance, referred to as mutual mortgage insurance (MMI), charges 0.5% per year of the loan amount.  In addition to the mutual mortgage insurance that is charged to the home owner each month, FHA charges an upfront mortgage insurance premium (MIP) of 1.50% for 30 year fixed rate mortgages. It is important to note that any unused portion of the upfront MIP may be refunded within the first 84 months of the loan.  Please see the MIP refund section for amounts.

Unlike in the past, the monthly mortgage insurance payment will automatically be cancelled when the outstanding principal balance reaches 78% of the original purchase price (provided that the monthly mortgage insurance payments have been made for a minimum of 5 years for 30 year loans).  This was a change that occurred for FHA loan that were originated after January 1, 2001.  15 year mortgages where the home buyer makes a down payment greater than 10% of the purchase price will not have to pay the monthly mortgage insurance.  Both the 203k loan and the 234c (condominium) loans now also require the upfront MIP (UFMIP) as well as the monthly MIP effective December 28th 2005.

The following is a table of the upfront MIP and monthly mortgage insurance percentages for FHA home loans under the 203b, 234(c), & 203k programs: