Two Types of MIP

• Most FHA loans require two types of MIP payments: an upfront premium paid in full at closing, and an annual premium paid monthly over the life of the loan. The FHA uses those MIP premiums to repay lenders when some buyers default on their loans.
  
  

Due At Closing

• You will pay your upfront mortgage insurance premium at closing, either in full or added to your mortgage and paid over the life of the mortgage loan. Rates for upfront MIP range from 1.5 to 3 percent of the mortgage depending on the terms of the loan.
  
  

Monthly MIP

• The FHA sets annual mortgage insurance premium rates that vary depending upon the loan-to-value ratio and the length of the mortgage. Buyers pay these annual premiums in monthly installments. As of October 1, 2008, annual premiums ranged from 0 to .55 percent of the mortgage.
  
  

Reducing MIP Costs

• You can reduce your MIP payments by obtaining a shorter 15-year loan or by increasing your down payment from the standard 3.5 percent to 5 percent or more.
  
  

An End to MIP?

• You will continue to pay monthly MIP payments until the FHA determines that your remaining mortgage balance has reached 78 percent of the value of your home when you originally purchased it.