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Private Mortgage Insurance (PMI): This is typically required for conventional loans (not FHA loans) if your down payment is less than 20% of the home's value. PMI protects the lender in case you default on your mortgage.
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FHA Mortgage Insurance (MIP): This is required for FHA loans, a government-backed loan option that allows for a lower down payment (often as low as 3.5%). MIP comes in two parts: an upfront Mortgage Insurance Premium (UFMIP) paid at closing and an annual MIP paid throughout the life of the loan (until you reach 20% equity in the home).
Here's a breakdown of the cost for each type:
Private Mortgage Insurance (PMI):
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Cost: PMI typically ranges from 0.5% to 1% of the original loan amount annually [1, 2, 3]. This means if you have a $100,000 mortgage, you could pay between $500 and $1,000 per year for PMI.
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Factors affecting cost: Your credit score, loan-to-value ratio (LTV), and the specific PMI program you choose can all affect the cost. Generally, a higher credit score and lower LTV will result in a lower PMI rate.
FHA Mortgage Insurance (MIP):
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Upfront Mortgage Insurance Premium (UFMIP): This is a one-time premium paid at closing, typically equal to 1.75% of the loan amount [4].
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Annual Mortgage Insurance Premium (MIP): This is an ongoing premium paid monthly as part of your mortgage payment. The annual MIP rate depends on the loan term (15 or 30 years) and your LTV. It can range from 0.45% to 1.05% of the original loan amount annually [4].
Here are some resources that can help you estimate the cost of mortgage insurance:
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Mortgage calculator with PMI: Many mortgage lenders and real estate websites offer mortgage calculators that factor in PMI based on your loan amount, down payment, and credit score.
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FHA MIP calculator: The US Department of Housing and Urban Development (HUD) website has a calculator to estimate your FHA MIP costs: https://www.hud.gov/program_offices/housing/comp/premiums/sfpcalc
Additional things to consider:
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PMI cancellation: Once you reach 20% equity in your home, you can typically cancel PMI. However, there might be fees associated with cancellation, so check with your lender.
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FHA MIP removal: FHA MIP usually cannot be cancelled, but there are some exceptions. You can find more details on the HUD website.
Remember: This is a general overview, and the specific cost of mortgage insurance will vary depending on your loan details, location, and lender. It's always best to get quotes from multiple lenders to compare PMI or MIP rates.