How Calculate FHA Mortgage Insurance

How Calculate FHA Mortgage Insurance




One of the mandatory payments you need to make as a possible homeowner is mortgage insurance. This is not for everybody, but only those who the lenders classify as high risk borrowers. Basically, you are a high risk borrower if you are not able to pay 20% of the value of your loan or if you do not have a good credit score. A combination of the two will see you paying higher interest rates and higher mortgage insurance rates than other people. The only benefits this insurance gives you is to get the lender off your back when you have defaulted from making your payments and allowing you to have a home already when you have not paid 20% down payment. Otherwise, it serves to increase the monthly premiums you have to pay to the bank and the total amount you will pay in the long run.

You need to understand here that the more you borrow, the higher the interest rate will be. This method too that you will have to pay a lot more mortgage insurance if you borrow a lot more money for your home. Also, people who borrow a lot more money have to pay a lot more in down payments compared to those who don’t. First, you need to know the amount of money you are planning to pay as down payment. Most lenders will not allow you to have a home without paying some sort of down payment. Find out the percentage of the amount you have put in as down payment in relation to the total amount of the loan. If this amount is more than 1% and less than 10% the mortgage insurance will be 0.5%.

basically if your loan is $100,000 and you have deposited an amount of 5%, the mortgage insurance will be 0.5% of the value of the loan, which will be $500 yearly. The monthly payment will be $41.67, which will be additional to the value of your monthly mortgage payments. For one reason or the other, you may feel the pinch of paying mortgage insurance every month and considering that you want to save a lot of money, you have got to think of perhaps footing the total down payment percentage required so that you do not have to pay mortgage insurance. Ensuring that you have a good credit score is one way of preventing unnecessary payments like this.




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