FHA insured mortgages require mortgage insurance to protect lenders against losses that result from defaults on home mortgages.
FHA Mortgage Insurance
Lender Protection for FHA Insured Loans
Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA loans require mortgage insurance primarily for borrowers making a down payment of less than 20 percent.
Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an upfront mortgage insurance premium of 1.5 percent.
FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:
- For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
- For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
- Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.
FHA NEWS and RELATED ARTICLES
When buyers are approved for FHA home loans, they are required to carry mortgage insurance. That includes both a Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Payment (UFMIP). When you apply for an FHA home loan, you're required to certify your income, offer proof of employment and show that you're a good credit risk with a history of on-time bill payments for at least 12 months. The Basic Allowance for Housing, or BAH for short, is a military benefit that comes in handy when applying for an FHA loan or VA home loan because it provides the lender with an easy-to-measure proof of a veteran’s ability to pay a mortgage.ADDITIONAL ARTICLES
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