When applying for an FHA loan, you must pay a mortgage insurance premium in advance at closing, plus an annual mortgage insurance premium that would be divided into 12 monthly payments. The amount you'll pay depends on the amount of your loan and your down payment. FHA loans require both an initial mortgage insurance premium (UFMIP) and an annual premium payment or annual MIP. You'll have to pay for this mortgage insurance until your loan-to-value ratio is low enough, that is, until you've paid a certain amount of your mortgage.
As mentioned above, in many cases, FHA mortgage insurance premiums are in effect for the life of the loan. While similar, it's not exactly the same as private mortgage insurance (PMI), which a conventional private mortgage lender charges every month when a homebuyer's down payment is less than 20% of the purchase price. People with loans older than 15 years must make monthly mortgage insurance payments for five years. When you choose to get an FHA loan through the Department of Housing and Urban Development (HUD) and the Federal Housing Administration, you must obtain a mortgage loan from an FHA-approved lender.
Mortgage insurance premiums apply specifically to FHA loans, but conventional loans come with a similar requirement, called private mortgage insurance (PMI). You can also check the initial reimbursement rates for HUD mortgage insurance premiums to see if you qualify. Like FHA mortgage insurance, the purpose of PMI is to protect the lender if you don't keep up with your monthly mortgage payments. FHA loans, or loans backed by the Federal Housing Administration, require borrowers to also pay for mortgage insurance.
Mortgage insurance and private mortgage insurance premiums help lenders offer mortgage loans to customers who might not otherwise be eligible. This question is difficult to answer because the cost of mortgage insurance and private mortgage insurance premiums varies from one homebuyer to the next. You may have to pay mortgage insurance when you get a loan to buy a home, as well as when you refinance. With a conventional loan, you only have to pay private mortgage insurance until your home equity reaches 20%.
