All FHA loans must have mortgage insurance. This is regardless of the borrower's credit score and down payment. The FHA uses these funds to cover the costs of defaults.
FHA mortgage insurance is usually more expensive than the private mortgage insurance (PMI) required on a conventional loan. Plus, you must maintain the FHA loan insurance for a minimum of 11 years. By contrast, for applicable conventional loans, you must maintain private mortgage insurance (PMI) only if your down payment is below 20% of the loan amount or until your home equity reaches 20%.
There are two types of FHA mortgage insurance:
- Upfront mortgage insurance premium (UFMIP): This is a one-time upfront charge of 1.75% of your loan amount. You may pay it in full at closing or add it to your loan balance.
- Mortgage Insurance Premium (MIP): This is an annual insurance premium that is required to be paid monthly. Your lender will incorporate it into your monthly mortgage payment. Amounts for this insurance range from 0.80% to 1.05% of the loan balance on a 30-year FHA.
Talk with a U.S. Bank mortgage loan officer to learn more about FHA mortgage insurance.