What is FHA mortgage insurance?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
FHA mortgage insurance has two parts: an upfront premium of 1.75% of the loan (financed into the balance) and an annual premium around 0.55% paid monthly. It protects the lender and is what allows FHA's low down payment.
On most FHA loans the annual premium lasts the life of the loan. Refinancing to conventional at 20% equity is the usual way to shed it. We'll show the total cost over your expected hold.
Two premiums
FHA mortgage insurance comes in two parts. There is an upfront premium, currently 1.75% of the loan, that you can roll into the loan. Then there is an annual premium paid monthly as part of your payment.
The insurance protects the lender if a borrower defaults, which is what lets FHA offer such low down payments.
How long it lasts
On most FHA loans with the minimum down payment, the annual insurance stays for the life of the loan. Putting 10% or more down can shorten it to 11 years.
Many buyers later refinance into a conventional loan to drop the insurance once they build equity. Reach out and we will show you the full cost and your exit path.