Mortgage Insurance Premiums, or MIP, are charged by HUD to protect investors against default. Using these premiums paid into a fund, HUD Guarantee's the performance of every FHA loan and protects a percentage of the Lenders investment. In return, this mandatory premium enables borrowers who might not otherwise fit within Freddie/Fannie conventional guidelines, to receive funding for the purpose of buying a home or refinancing at conventional mortgage rates.

Every HUD loan is subject to the upfront MIP premium of 1.75% of the loan amount.

All programs but the 15 year loan, are subject to a .5% annual premium paid monthly for a mandatory minimum of 5 years. After 5 years, if the LTV is less than 78%, the monthly premiums will no longer apply.

15 year loans are not subject to monthly MIP premiums if the loan to value is less than 90%. Otherwise MIP payments are required until the LTV is less than 78%.

If refinancing, the upfront MIP will be pro-rated and credited at close towards your new MIP up front fee, based upon the number of years you have paid on your loan up to 5 years. Monthly MIP still applies based upon the above criteria.

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