Click To View Links

First Time Home Buyers
FHA Mortgage Insurance

Discover what the first time home buyers FHA mortgage insurance fee is and why it is necessary below.

Is this something I really must pay? Can I get help in paying it? 

This mortgage insurance fee is a hidden cost that many people do not think about.

Since FHA requires mortgage insurance premium (MIP) on many of its loan programs, you may be required to pay this. It is to be paid upfront at the closing.

For many new home buyers, this upfront cost can be paid by the seller. Depending on how you negotiate the purchase contract, this could be no out of pocket money for you.  

If you think you are ready, be sure to get a loan that works well with first time home buyers.

Want to see if you qualify for a mortgage? Click here to find out.

By being aware of this ahead of time, you can get your negotiations in place so you don't have to pay the upfront cost.

If the seller doesn't pay it, then, you need to be aware of this cost since it can affect how much money you need at the closing table. First let's talk about why this fee is charged.

Why is This Fee Necessary?

first time home buyers fha mortgage insurance benefit

This mortgage insurance is like having a life ring around your mortgage dollars. It does not really protect you though. It protects the lender.

There is a benefit though, since it protects the lender, they are more willing to loan you the money. You see, first time home buyers are considered a higher risk. They usually have less than perfect credit, need help with the down payment and other things that makes their loan harder to obtain.

First time home buyers FHA mortgage insurance helps the lender to consider you for the loan.

You will also have a monthly MIP to pay which will be included in your PITI (principle, interest, taxes, and insurance). I tell people to look at it like an increase to your interest rate because in reality that’s exactly what it is. It never goes away until you sell the house or refinance it.

UPDATE: Beginning January 26, 2015, the annual FHA mortgage insurance premium, which is paid monthly has been reduced from 1.35% to .85% saving you money!

First Time Home Buyers FHA Mortgage Insurance

Since FHA loans are used by mostly first time home buyers, the MIP is usually higher than on a conventional loan because it’s considered a higher risk loan. On a FHA purchase you will be charged a percent of the sale price upfront and there is an annual renewal rate for this as well.

Conventional loans could be as low as .50% (with a 5% or more down payment) and renewals are as low as .30% in subsequent years. When you pay your balance down below 80% on conventional loans it drops off and you do not have to pay MIP any longer.

On FHA loans, the monthly MIP never stops regardless of how much you pay down on the balance of your loan. So its a good idea to refinance once your loan is below the 80% LTV so you don't have to pay this premium any longer.

Would You Like to Understand More?

I have an awesome calculator to help you figure your FHA closing costs. Be sure to take some time to explore it.

Would you like to know what home buying grants are available in your state?

Would you like some help? Perhaps a personal coach to guide you through the process is what you're looking for. For free coaching, fill out the questionnaire here. Then you will be contacted and offered the assistance you need.


Leave First Time Home Buyers FHA Mortgage Insurance and return to Home Mortgage Information main page.

Go to House Buyer Solutions Home Page.

New Jersey Grants

Click on Image to Learn More

South Carolina Grants

Click on Image to Learn More

Recent Articles

  1. FHA Lending Guidelines

    Jun 10, 17 02:58 PM

    According to the FHA lending guidelines, is it possible for escrow to be paid out of packet instead of rolled into the loan? What are the guidelines for a 2nd time home owner? These are answered below…

    Read More

  2. FHA Title 1 Loan Explained

    Jun 08, 17 08:15 PM

    Are you interested in the FHA Title 1 Loan program and wonder where to find a lender who works with this program? Others have wondered the same thing, find the answers on this page.

    Read More

  3. FHA Help

    May 26, 17 03:14 PM

    Would you like some FHA help? Perhaps you are wondering if it is wise to add a significant other to the mortgage? Or why a mortgage company would ask you to go conventional instead of FHA? Find answer…

    Read More

Buyer Programs

fha loans

The FHA Loan Products

Home Buyer Grants

zero down home loans

Zero Down Home Loans


Follow Us On Twitter

follow me on twitter