Upfront Mortgage Insurance Premium

Many borrower's who have taken out a sub-prime mortgage who are refinancing to a FHA mortgage are often unaware that they have to pay an upfront mortgage insurance premium or MIP. This premium is paid for at the time of closure. A borrower has the choice of either wrapping the MIP into the loan or paying a cash lump sum on closure. If a borrower is paying less than 10% of the mortgage then FHA charges a monthly mortgage insurance that works out at 0.5% of the actual loan amount.

FHA requests a mortgage insurance premium (MIP) for all home buying programs. When closing an account an up front premium of 1.50% of the home loans amount is to be paid that can then be financed into the mortgage amount. There is also a a monthly MIP cost included in the PITI of .50%. Condos only require a monthly MIP.

A borrower who has a credit score must be treated as risk-classified as FHA's TOTAL Mortgage Scorecard. Those borrowers who have decision credit scores below 500 and with loan-to-value ratios at or over 90 percent are not accepted by FHA for insured mortgage financing.

Borrowers who do not posses credit bureau scores have to be manually underwritten and classed as eligible based on criteria set out in non-traditional credit guidelines. The Housing and Economic Recovery Act also offers a reduced fee for the upfront premium from 3.00 to 2.75 percent for first-time purchasers who also fulfill HUD-approved pre-purchase counseling. Although due to the fact that no premium for purchase money mortgages will go over 1.75 percent through September 30, 2009, there is no reduced fee in the upfront premium even for counseled first-time buyers.

EEM is a type of FHA program that insures mortgage loans and persuades lenders to offer mortgage credit to borrower's who would not be able to receive a conventional loan that was affordable. People who fall into this category include first time home buyers and those living in disadvantaged neighborhoods.

Borrower's who are granted FHA's most popular section 203 (b) mortgage insurance that are available for one to four person family homes are able to receive up to 96.5 percent financial assistance, and have the ability to fold closing costs and the upfront mortgage insurance premium into the mortgage. The borrower also has to pay a yearly premium.