How to Figure Out Mortgage Insurance on an FHA Loan

home mortgage

Mortgage insurance on an FHA loan is not a set amount consistent from bank to bank. Each lender creates and executes its own guidelines. A good rule of thumb for finding the amount of mortgage insurance required for an FHA loan involves the use of 0.720 percent as a multiplier. This approach is not 100 percent exact, but the result of the multiplication will result in a dependable ball park figure.

Instructions

1. Understand the definition of mortgage insurance. It is a monthly fee paid for insurance to protect the lender in case you default on your mortgage.

2. Mortgage insurance on an FHA loan is approximately 0.720 percent of the base loan amount divided by 12 months. For example if you had a $100,000 FHA loan, you would multiply $100,000 by 0.0072 to determine the annual mortgage insurance premium, which would be $720. That figure would be divided into monthly payments of $60.

3. Mortgage insurance must be maintained on an FHA loan until the balance owed falls to approximately 78 percent of the value of the house.

Tips & Warnings

• It isn't perfect, but this calculation is pretty close

References

• "A Homeowner's Guide to Mortgage Acceleration"; Tony G. Jones; July 6, 2006
• "FHA Origination Guide For Mortgage Professionals"; Adrianne McCauley; March 3, 2008