Mortgage Insurance Premiums(MIP) on FHA Loans?

[Adam Juodis]

I'm looking into possibly doing a house hack. While reading my book, the discussion about MIPs came up, and that there is a possibility that a good deal can be made bad due to high MIP fees when using a FHA loan. What i got from it is that during the time of purchase, part of your downpayment goes to the MIP, and after that you pay towards the MIP every year. Needless to say, the book did not do a very good job explaining how that can ruin a good deal.

Lets say I bought a triplex to house hack in and the purchase price was 300k. Knowing this, can i tell how exactly will I be affected by a MIP? Thank you for helping me clarify!

[Albert Bui]

Wayne is the closest answer, nice @Wayne Brooks

There are two parts to FHA financing and mortgage insurance theres the upfront mortgage insurance premium (UFMIP) and the monthly mortgage insurance (MMI).

The UFMIP or 1.75% upfront MIP is typically financed into your loan at closing so you dont come into closing with these funds ($1750 dollars for every 100,000 loan amount borrowed).

Then its .85% annual MI thats divided by 12. Its paid for a min of 11 years (put 10% down payment +) or the life of the loan (if you put down less than 10% down) depending on how much you put down.

You can hike your rate up around .375%typically to get enough credit to cover the entire UFMIP so that you're only left paying on the MMI every month. This may make sense if you dont plan on owning the property long term because you won't be adding 1.75 points to your loan this way and when you go to sell or refinance your payoff balance will by that much lower, make sense?