How to Calculate FHA Mortgage Insurance

You are required to understand the terms, conditions and other lesser known characteristics of mortgages in the United States. According to a research conducted by the American Federal Housing Authority, more than 60 percent houses in the US are purchased on mortgages. If you are looking to become a home owner, you will need to apply for the mortgage insurance as well as the mortgage loan. Although this type of insurance does not protect the owner, it is required as part of the laws. Knowing the capital investment and starting costs is absolutely crucial when determining the budget.


  • 1

    Prepare a list of all the houses in your region that interest you. Consider checking all the houses one by one and select the one that best suits your budget and needs. Once you have found a house that interests you and is in your budget, talk to your bank to discuss your mortgage loan needs. For those who have a poor credit history they should work on it to obtain for their application to be successful. Determine the interest rate and the APR rate the bank is offering.

  • 2

    It is absolutely crucial to make yourself familiar with the Federal Housing Authority mortgage insurance formula. If you do not understand their system, you will end up paying more money than you should. FHA premiums typically depend on the sliding percentage scale. Therefore if your loan amount is large then your insurance premium and upfront payment is also likely to be higher.

  • 3

    Now decide the amount you will be paying as the down payment for your new home. According to most state laws, you are required to put down money to secure the property and pay 1.5% of that amount as the mortgage insurance payment. For example if the total price of the house is $200,000 then the insurance payment will be $3000.

  • 4

    Next find out your monthly premium. If you have put more than 1% down on your home but less than 10%, your monthly premium is likely to .50% of that on monthly basis. Using the above example, if you have paid 7% as the down payment, your monthly mortgage insurance premium will be $889. Divide this amount by the number of months in a year to obtain your monthly cost.

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