FHA / PMI - Sliding Percentage Scale?

Question

Hoping to find some clarity on this, I looked through several other topics but didn't see this specific question answered (Apologies if I've missed something.)

Is there a clear way to calculate PMI with an FHA loan on a property? I'm getting mixed messages between what our lender is giving us, usmortgagecalculator.com and several other resources. Do we have any leverage to negotiate this?

Is there a set rate/scale that lenders use based on LTV? Wondering if there's any advantage to shopping around, if lenders have different scales...

If it makes a difference, this is for a duplex we will be househacking / owner-occupy.

As always, thanks for your wisdom.

Chris Mason · Answer

Hi Sean,

Here's your cheat sheet, page 2.

When it says 85 bps, which is >90% of scenarios, you can do this formula to get within a few dollars a month:

[ Loan amount * 0.85% / 12 = monthly MIP ]

Your effective interest rate is 0.85% higher than your nominal note interest rate. And for FHA, that's one-size-fits-all no matter your FICO score.

The real formula, for FHA MIP which is not technically PMI even though lots of industry insiders even make that mistake, is a little more convoluted. The above will get you within a few bucks a month.

PMI, which comes with conventional non-FHA mortgages, can vary by lender. Typically big banks and credit unions are captive to a single PMI provider, mortgage brokerages and banks can shop it among mortgage insurance providers. Each PMI provider is stronger in different areas. If you google search "Genworth PMI quote," "Radian PMI quote," and "National MI PMI quote" you can play around and see the variance, but again FHA is one-size-fits-all right from that gov't chart I linked from HUD.

Sean Durham · Answer

@Chris Mason and @Jeff Dulla - thanks both for the context and clarification. Exactly what I was looking for, thank you!

Jeff Dulla · Answer

@Sean Durham