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What are the three types of Mortgage Insurances?
FHA Mortgage Insurance Premium (MIP)
FHA requires amortgage insurance premium (MIP) for its homebuying programs. An up front premium of 1.50% of the loan amount is paid at closing and can be financed into the mortgage amount. In addition, there is a monthly MIP amount included in the PITI of .50%. Condos do not require up front MIP - only monthly MIP.
The mortgage insurance premium paid on an FHA loan is always significantly higher than on a conventional program. On an FHA loan the borrower will be charged a mortgage insurance premium equal to 1.50% of the purchase price of the property and a renewal premium of .500% in subsequent years.
If you paid an upfront mortgage insurance premium, you will also be charged a monthly mortgage insurance premium until the loan-to-value of your mortgage reaches 78 percent of the initial sales price or appraised value of your home, whichever was lower (provided that premiums are paid for at least five years). You will reach the 78 percent loan-to-value threshold in one of two ways: Through normal amortization as you make your monthly payments, or by paying additional principal on the mortgage. Your lender can advise you on when the mortgage will reach the 78 percent loan-to-value threshold. If you were not charged an upfront premium, you will pay the monthly premium for the life of the mortgage.
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The following is a table of the upfront MIP and monthly mortgage insurance percentages for FHA home loans under the 203b, 234(c), & 203k programs: |
For 30 year loans originated before January 1, 2001
| Upfront MIP |
Down Payment |
Monthly MI |
| 2.25% |
4.99% or less |
0.50% |
| 2.25% |
5% to 10% |
0.50% |
| 2.25% |
10.01% or more |
0.50% | |
For 30 year loans originated after January 1, 2001
| Upfront MIP |
Down Payment |
Monthly MI |
| 1.50% |
4.99% or less |
0.50% |
| 1.50% |
5% to 10% |
0.50% |
| 1.50% |
10.01% or more |
0.50% | |
For 15 year loans originated before January 1, 2001
| Upfront MIP |
Down Payment |
Monthly MI |
| 2.0% |
4.99% or less |
0.50% |
| 2.0% |
5% to 10% |
0.50% |
| 2.0% |
10.01% or more |
0.50% | |
For 15 year loans originated after January 1, 2001
| Upfront MIP |
Down Payment |
Monthly MI |
| 1.50% |
4.99% or less |
0.25% |
| 1.50% |
5% to 10% |
0.25% |
| 1.50% |
10.01% or more |
0% | | |
VA LOAN FUNDING FEE
The VA funding fee is required by law. The fee, currently 2.15% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.3%. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. There is no monthly fee included in the PITI. Please see chart below:
funding_fee_tables.doc
The following persons are exempt from paying the funding fee:
- Veterans receiving VA compensation for service-connected disabilities.
- Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
- Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).
Please note that the VA has the final say on who is exempt.
Conventional Loans Private Mortgage Insurance
Conventional loans are backed (garaunteed) by private mortgage insurance companies. The two most popular PMI companies are MGIC- Mortgage Garanty Insurance Corp. and RMIC- Republic Mortgage Insurance Company. Thier rates are ever changing. You can go to MGIC rate finder below and fill in your information to find out what your yearly rate would be on a conventional mortgage loan below at:
http://www.mgic.com/is/html/ratefinder.html
RMIC has a rate estimator as well for you to compare insurance rates at:
http://rateestimator.rmic.com/
Mortgage Life Insurance
This insurance guarantees that if you die your mortgage will be paid in full. This insurance can be conveniently purchased through your lender and the premium added to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker. Mortgage Life Insurance is not a required insurance on your home loan.
Veterans' Mortgage Life Insurance (VMLI)
PL 110-289 Extends VMLI Coverage
Effective July 30, 2008, PL 110-289 extended VMLI to disabled active duty service members as well as service members and veterans who suffer from a severe burn injury.
The Veterans' Mortgage Life Insurance (VMLI) program provides mortgage life insurance to severely disabled veterans and service members. It is designed to pay off home mortgages of disabled veterans and service members in the event of their death.
Only veterans and service members who have received a Specially Adapted Housing Grant from VA are eligible for VMLI. This is a grant to help a disabled veteran or service member build or modify a home to accommodate his or her disabilities.
VMLI provides up to $90,000 mortgage life insurance payable to the mortgage holder (i.e., a bank or mortgage lender), in the event of the veterans or service members death. The amount of coverage will equal the amount of the mortgage still owed, but the maximum can never exceed $90,000. VMLI is decreasing term insurance which reduces as the amount of the mortgage reduced. VMLI has no loan or cash values and pays no dividends.
We have a premium calculator available to help you determine your VMLI premium amount. Follow this link to use theVMLI Premium Calculator.
https://insurance.va.gov/inForceGliSite/VMLICalc/VMLICalc.asp
Veterans or service members who receive a grant for the purchase of Specially Adapted Housing are advised by Loan Guaranty personnel at their interview of their eligibility for life insurance to cover the unpaid mortgage on their home. The Specially Adapted Housing Agent will help the veteran or service member complete VA Form 29-8636, Application for Veterans' Mortgage Life Insurance. If a veteran or service member does not apply for VMLI coverage at that time, VA will send a letter informing them that they are eligible for such coverage. In addition to completing VA Form 29-8636, the veteran or service member must provide information about their current mortgage.
You can get more information about VMLI by downloading and viewing the VMLI Brochure. The application for VMLI, VA Form 29-8636, Application for Veterans' Mortgage Life Insurance is also available for download from this site.
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