203b Financing and Borrower DTI Requirements
An MIP, or mortgage insurance premium, is the way that FHA 203(b) loan borrowers pay for FHA mortgage insurance. FHA MIP is designed to protect the lender in case the borrower defaults on their mortgage. In general, MIP is paid twice; once as a payment at closing, and then on a monthly basis. Monthly FHA MIP rates vary, and are generally calculated via factors such as the loan’s LTV and term. These rates are re-calculated every 12 months, but generally hover around 1% for most borrowers.
Can You Cancel FHA MIP?
Unlike private mortgage insurance (PMI), borrowers cannot cancel MIP, even if they have built up significant equity in their home. However, if you have more than 20% equity in your home, you may be able to refinance it with a conventional loan and avoid paying mortgage insurance completely.