Mortgage Insurance

Colorado Natl Monument 2 Mortgage Insurance protects the lender or investor in case of loan default.

Conventional Conforming loans (also known as qualified mortgages or QM) require mortgage insurance when financing more than 80% loan-to-value. This is typically done in the form of a monthly amount, but can also be paid up front or financed into the interest rate on most loans. The amount is determined by credit score, loan-to-value, and loan term. It typically ranges from 0.35% on a shorter term high-credit score to 1.1% on a lower score at maximum financing. Conventional monthly mortgage insurance is required for at least two years and then can be cancelled when the loan is at 78% loan-to-value or less. In most cases, it is cancelled automatically at that time. There is no mortgage insurance on a conventional loan when starting out at 80% loan-to-value or less.

Conventional Non-Conforming (also now known as non-qualified mortgages or non QM) loans typically have a higher interest rate and have no mortgage insurance (in most cases).

VA has no monthly mortgage insurance, but does charge a 2.30% funding fee or up-front mortgage insurance premium (UFMIP) for first-time users and a 3.60% funding fee for subsequent users. Example: $300,000 base loan amount would cost a $6,900 funding fee for first-time use for a total loan amount of $306,900 ($300,000 x 0.023) or $10,800 funding fee for subsequent use, making the total loan amount $310,800 ($300,000 x 0.036).

FHA has a 1.75% up-front mortgage insurance premium (UFMIP) and either 1.3% monthly or 1.35% monthly mortgage insurance for the 30-year term, depending on loan-to-value and 0.6% monthly for the 15-year term. This is charged even if the loan-to-value starts off under 80% and never cancels on a 30-year term. It does cancel after 11 years on the 15-year term. Example: $300,000 base loan amount would cost $5,250 in up-front mortgage insurance premium for a $305,250 total loan amount and $343.41 ($305,250 x 0.0135% / 12) monthly mortgage insurance for a 30-year term or $152.63($305,250 x 0.006 / 12) monthly mortgage insurance for a 15-year term.

USDA has a 1% up-front mortgage insurance and then 0.35% monthly mortgage insurance. The monthly mortgage insurance is cancelled after two years and once the loan is under 78% loan-to-value. Example: $300,000 base loan amount would cost $303,000 ($300,000 x 0.01% = $3,000) total loan amount and monthly mortgage insurance of $88.38 ($303,000 x 0.0035 / 12).

Section 184 (Native American Loan) – 1.5% Up-front mortgage insurance premium or guarantee fee and then a 0.01% monthly mortgage insurance amount. The monthly amount was added in the fall of 2014. Prior to this, there was no monthly amount. Example : $300,000 base loan amount would cost $4,500 (200,000 x 0.015%) in up-front mortgage insurance premium, making the total loan amount $304,500. The monthly amount would then be $25.38 ($304,500 x .001% / 12).