FHA Loans are insured by the Federal Housing Administration. This allows more people to borrow with low mortgage rates and lower credit requirements. The down payment can be as low as 3.5%.
The Upfront MIP can be paid either at closing or as a part of your monthly payments. It is equal to 2.75% of the loan value.
The payments are rolled into an escrow account in order to make mortgage payments in case you default on the loan. It’s essentially a security net for the lender.
The Annual MIP is payed monthly. Depending on the specifics of your loan, the payments can be anywhere from 0.45% to 2.05% of your loan value. This may seem like a lot, but you typically only pay the Annual MIP for 11 months.
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