How to Calculate the PMI for an FHA Loan

October 21, 2011 by  Filed under: Loans 

One of the best ways of getting a loan with a little down payment is getting an FHA loan. This is one of the ways of getting a secure roof on your head when you do not have a lot of money to pay as down payment. However, when you do not have a lot of money, you do not have a lot of choices either. What this means is that you will have to pay off this mortgage with PMI, an insurance policy that the most banks will insist on you paying. This is a way of providing monetary security to the bank which gives you money with a little or no down payment required. When you have the right information, you will be able to calculate the amount of PMI you will pay on an FHA loan.

Know the value of the home you are planning to buy and the amount of money the FHA will give you. Also, you need to know the interest rates and the terms of the loan payment on the home. All these can be acquired by your broker if you are not in a position to. If you do not have the PMI calculator, there is a simpler way of calculating your PMI value.

First of all, you need to find out what your loan to value (LTV) is. This value is the remainder of the loan you have to pay divided by the value of the home. For example, if the home you want to buy is worth $100,000 and you have paid a down payment of 10%, what remains of the loan is $90,000 or 90% of the value of the home. Check with your lender on the PMI table of the lender. Usually, the lender will have a table on what percentage of PMI to charge certain value of LTV. Usually, the higher the amount of loan you buy, the higher the interests rates and the higher the PMI you will have to pay.

In most tables, the value of private mortgage insurance on such a percentage of LTV will be 0.5%.In this case the PMI will be 0.5% of the remainder of the mortgage loan, which in this case is $90,000. This will be $450 annually. What this means is that you will have to pay $37.5 every month on your monthly installments in the name of PMI.

Learn more about mortgage, please visit Linda Clayton’s site: mortgage calculator with insurance and mortgage calculator with taxes

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