Maximize Your FHA Insurance in PA
FHA upfront mortgage insurance is a type of insurance that is
required by the Federal Housing Administration (FHA) to protect
lenders from losses that may result from borrowers defaulting on
their loans. This insurance allows lenders to offer FHA-insured
loans with lower down payment requirements and less stringent
underwriting standards, making it easier for borrowers to qualify
for financing.
While the upfront mortgage insurance premium (UFMIP) paid by
borrowers is typically added to their loan balance, borrowers should
understand that this will increase the overall cost of their loan,
as they will be paying interest on the UFMIP amount over the life of
the loan.
The upfront mortgage insurance payment is payable at closing and is now 1.75 percent of the base loan. The base loan is the amount after subtracting the down payment, and most FHA applicants make the minimum 3.5% down payment.
Understand FHA Mortgage Insurance Calculations
In addition to the upfront mortgage insurance cost, buyers must pay a monthly premium. Here's the math:
30-year FHA upfront mortgage insurance example | |
---|---|
1. Sales price | $ 200,000 |
2. Less down payment (3.5%) | $ 7,000 |
3. Base mortgage = | $ 193,000 |
4. Funding fee percentage | X 1.75% |
5. Funding fee cost | $3,377.50 |
The FHA funding fee and monthly mortgage insurance have changed numerous times. Currently, the upfront mortgage insurance is 1.75% of the loan amount.
The base mortgage (line 3) and the funding fee cost (line 5) are added together for a final loan amount of $196,377.50. The principal and interest payment is calculated on the "base" mortgage and upfront cost.
Learn About FHA Monthly Mortgage Insurance Premiums
The
FHA monthly mortgage insurance premium is calculated based on the
loan amount, term length, and loan-to-value ratio. The bonus is
divided into an upfront premium (UFMIP) and an annual premium.
The upfront premium is 1.75% of the loan amount and is paid at
closing.
The annual (monthly) premium is paid in 12 monthly installments
and is 0.85% of the loan amount for loans with terms greater than 15
years and loan amounts less than $625,000.
FHA mortgage insurance protects lenders from loss if borrowers
default on their loans. The insurance allows lenders to offer loans
with lower down payment requirements and credit standards, which
makes homeownership more accessible to borrowers who might not
otherwise qualify.
This chart illustrates the monthly mortgage insurance costs based on a down payment, loan amount, and loan term.

Here's how the monthly mortgage insurance is calculated for an FHA loan:
30-year FHA Monthly MIP | |
---|---|
1. Sales price | $ 200,000 |
2. Less down payment (3.5%) | $ 7,000 |
3. Base mortgage = | $ 193,000 |
4. MIP percentage | X .85% |
5. Funding fee cost | $1,640.50 |
6. Divided by 12 months | $136.71 |
FAQs About FHA Mortgage Insurance
Q. How to get rid of FHA mortgage insurance?
A. A. The only way to get rid of FHA mortgage insurance is to refinance into a conventional loan, and you can't simply cancel it.
Q. What does FHA mortgage insurance cover?
A. FHA mortgage insurance covers the lender if the borrower defaults on their loan. This insurance protects the lender from having to bear the total cost of the loan if the borrower cannot repay it. The insurance also allows the lender to offer borrowers with less-than-perfect credit a chance to get a mortgage.
Q. How to avoid mortgage insurance on a FHA loan
Conclusion
In conclusion, FHA Mortgage Insurance in Pennsylvania is an
important measure that allows lenders to reduce their risk and help
borrowers to obtain affordable financing. The FHA upfront mortgage
insurance requirement protects lenders against potential losses,
allowing them to offer more competitive products and services.
By taking the time to understand the FHA requirements, borrowers in
Pennsylvania can shop for a loan with confidence. Furthermore, it is
essential to remember that each lender may have additional
requirements related to FHA mortgage insurance that must be met.
Recommended Reading
10 Home Buying Tips for First Time Buyers
Buyer Closing Cost Calculator PA
The FHA Amendatory Clause: What You Need to Know
Read more about FHA mortgages at FHALoanPlus.com