HOW TO CALCULATE YOUR MORTGAGE INSURANCE PAYMENt
Mortgage insurance (private mortgage insurance - PMI for short), is insurance that protects a lender in the event that a borrower defaults on a home loan. Mortgage insurance is usually required when the down payment for a home purchase is less than 20 percent of the purchase price - or when one has less than 20% equity in a refinance scenario. Monthly mortgage insurance payments are usually added into a borrower's total monthly mortgage payment.
PMI fees vary, depending on the size of the down payment, the borrower's credit and the loan type.
Our Mortgage calculator has a field for PMI which requires that one fills in a percentage - or what we call a mortgage insurance factor - which is used to calculate your monthly mortgage insurance payment.
So how do you know what factor to plug into the PMI field? Some programs, such as FHA and USDA have a one-size-fits-all factor that applies to all people using that particular loan type. Others such as VA don't have monthly PMI at all.
Here is a breakdown of the most common programs and associated PMI factors:
- FHA - Monthly PMI factor for 30 year fixed loans is (.85%), but if you put down 5% or more the factor goes down to (.80%)
- USDA - Monthly PMI factor for all 30 year fixed loans (.35%)
- VA - Plug in (0.00%) no mortgage insurance required!
- Conventional - Conventional loans a.k.a. Conforming, Fannie Mae or Freddie Mac are more complicated. Go to MGIC's webpage to get your factor.