What is FHA MIP?

By Liz Clinger Updated on 7/20/2017

When taking out an FHA-insured loan, home buyers are required to pay a mandatory mortgage insurance premium (MIP).  MIP protects the bank from taking a loss if a homeowner stops making their mortgage payments

It's insurance that gives the banks the ability to offer such low rates, even when home buyers are putting down as little as 3.5% of the purchase price of the home. 

The FHA mandates two forms of mortgage insurance fees: upfront and annual. Mortgage Insurance Premiums are measured in Basis Points (bps); a Basis Point is a unit equal to 1/100th of 1%. Therefore, a fee of 50 basis points is equal to 0.5% of the loan.

Upfront FHA MIP

Upfront Mortgage Insurance Premiums (UFMIP) are the upfront mortgage insurance costs required to acquire an FHA loan. Upfront Mortgage Insurance Premiums consist of 175 basis points or 1.75% of the base loan amount. Though labeled “upfront,” these fees can be inserted into the loan balance. However, borrowers who choose not to pay up front will pay interest on the amount added to the mortgage.

Annual FHA MIP

Annual Mortgage Insurance Premiums (MIP) are paid in monthly installments as part of a borrowers’ mortgage statement. The premium amount is calculated based on the loan to value ratio of the borrower, the term of the loan, and the size of the loan.  However, the amount of premium paid monthly remains fix for the entire duration.

Annual MIP for FHA Loan Terms Exceeding 15 Years

LTV Exceeding 95%

• Loans of $625,000 or less –  135 bps
• Loans exceeding $625,000 – 155 bps

95% LTV or Lower

• Loans of $625,000 or less –  130 bps
• Loans exceeding $625,000 – 150 bps

For mortgages with a loan-to-value less than or equal to 95% that are $625,000 or less, the Annual Premium is 130 basis points. For loans with the same LTV and amortization that exceed $625,000, the Annual Premium is 150 basis points.

For mortgages with a loan-to-value exceeding 95% that are $625,000 or less, the Annual Premium is 135 basis points. For loans with the same LTV and amortization that exceed $625,000, the Annual Premium is 155 basis points.

Annual MIP for FHA Loan Terms Less than or Equal to 15 Years

LTV Exceeding 90%

• Loans of $625,000 or less –  70 bps
• Loans exceeding $625,000 – 95 bps

LTV from 78.01% to 90%

• Loans of $625,000 or less –  45 bps
• Loans exceeding $625,000 – 70 bps

78% LTV or Lower

• Loans of $625,000 or less –  45 bps
• Loans exceeding $625,000 – 45 bps

For mortgages with a loan-to-value exceeding 90% that are $625,000 or less, Annual Premium is 70 basis points. For loans with the same LTV and amortization that exceed $625,000, the Annual Premium is 95 basis points.

For mortgages with a loan-to-value from 78.01% to 90% that are $625,000 or less, the Annual Premium is 45 basis points. For loans with the same LTV and amortization that exceed $625,000, the Annual Premium is 70 basis points.

For mortgages with a loan-to-value 78% or lower that are $625,000 or less, Annual Premium is 45 basis points. For loans with the same LTV and amortization that exceed $625,000, the Annual Premium is 45 basis points.

FHA Streamline Refinances On or before May 31, 2009

• Upfront MIP – The UFMIP fee for FHA streamline refinances originated on or prior to May 31, 2009 amounts to 0.01% of the base loan balance.
• Annual MIP – The MIP fee for FHA streamline refinances originated on or before May 31, 2009, amounts to 0.55% of the base loan amount.

FHA Mortgage Insurance Termination

For any FHA loans that were originated on or after April 1, 2013, mortgage insurance termination guidelines have changed. With these changes in place, FHA mortgage insurance now persists for the lifetime of the mortgage, and are not eligible for termination at 78% LTV.