If you want to know how to calculate PMI on a loan, there are a lot of variables to consider. In this video I explain everything you need to know to calculate mortgage insurance the right way, including:
✅ The details you need for an accurate calculation
✅ Difference between MIP and PMI
✅ When mortgage insurance applies
✅ Upfront vs. Monthly
✅ Example rates
✅ Specific calculations for FHA, RD, and Conventional loans
✅ Different PMI options
✅ Resources to help you!
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All those things go into this calculation. How in the world are you gonna know that if you don't have a loan officer and you're not in process and they don't have all your details? You're not, that's the point.
Today's topic, how to calculate PMI. Well my first response is, you're probably not gonna want to. It's quite complicated. But I'm still gonna give you all the information. By the end of this video, you're gonna understand the different types of PMI, some of the ways that you can possibly calculate the PMI as well, and understand all the variables that go into this based on the different loan programs. Stick around.
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My name is Stephanie Weeks, and I have helped thousands and thousands of customers with millions and millions and millions in mortgage financing. And my goal here with this channel is to help you understand anything and everything that you can around mortgage education. I've been a loan officer for over 17 years, and I've been recognized in the top 1% in the country for loan originators, as far as production. Thank you for tuning in.
There's PMI. There's MIP. There's upfront. There's single. There's upfront and monthly. There's the .85 calculation, the .35 calculation, the .50 calculation, the 1% calculation, the 1.75. Have I lost you yet? Oh my gosh. There are so many variables that go into MIP and/or PMI. Hang tight with me. I'll try not to bore you to tears, but I will give you information so that you at least understand what your options are and what goes into calculating mortgage insurance.
Six. I have broken this down into six categories to quickly discuss with you guys today. So let's dive in. Number one, MIP versus PMI. MIP is mortgage insurance premium. That's associated with government-backed loans, such as the VA, FHA, RD. Then there's PMI. That PMI, that is private mortgage insurance, and that is on the private side. That is for conventional loans. Those are those differences. So when you hear those terms interchanged, or on different loan types you hear them called different things, that is the reason.
Let's dive into number two. When and where does this apply? MIP, again, that's mortgage insurance premium on an RD loan. Now, not real often, but these calculations and figures do change. I'm giving you what they are as of now, and I'm gonna base everything for this video on purchases. Rural development, MIP. You have an upfront, and you have a monthly. You have your 1% upfront that goes into the loan unless you wanna pay it in cash, and it helps to continue funding the program and making it available. There's staffing and a lot of expenses that go into keeping these programs alive and active.
So your MIP has got your upfront on RD. You've got your monthly on RD. The monthly is a .35% calculation. I'm gonna break out the calculator later, so hang tight. Then we have FHA, another government-backed loan. Again, that's called MIP. And you've got your upfront as well, and you've got your monthly. I'm basing this off of a purchase with a minimum down payment. You've got 1.75% upfront, and you've got your .85% monthly calculation in that example. Next we have VA. VA has no monthly, but has an upfront, based on your eligibility, and there's a scale, and it could be as low as zero or complete exemption. Then we've got PMI. Again, that's private mortgage insurance associated with conventional loans. Conventional, you can have many options as far as what you want. Most people know and understand the monthly, but in this video, we're gonna get into more information, that way you know and understand, there's actually more options than just the monthly.
So number three, let's further dive in. Number three is let's talk about FHA calculations. I'm gonna tell you how to calculate what this is gonna cost you. With a $100,000 loan amount, remember I promised you, or I said in the beginning, you probably don't wanna do this 'cause it's complicated. You wanna do it the right way, here's how we do it. You have a $100,000 loan amount. You have a 1.75% funding fee. That's an upfront funding fee, or MIP, of $1,750. To accurately calculate the monthly MIP, you're gonna have to take $1,750, 'cause you're probably not gonna pay that in cash, you can, but most people don't, we're gonna add that to your $100,000 loan amount. Now we're dealing with a loan amount in this example of 101,750. Now we're gonna figure out the monthly calculation. We're gonna take our loan amount, 101,750, times .85 equals, divided by 12, the decimals are gonna be off 'cause this is my cheating way to do it, but that's $72.07 a month. So $100,000 loan amount, FHA purchase, upfront is 1,750, added to the loan amount to calculate your monthly of 72.07 that is added into your monthly payment. That is your FHA MIP cost and how to calculate that.
Number four, we're gonna talk about the RD calculations now. So we're gonna use our same example. Purchase, rural development. $100,000 loan amount. We've got a $100,000 loan amount. We have an upfront of 1%. That equals $1,000. We're gonna add that to our loan amount. That way we can accurately calculate the monthly. You have a loan amount of 101, even in this example, times .35% monthly calculation. Divide that by 12. We have $29.46 a month. That is your monthly MIP on an RD loan in this example. And that's how you accurately calculate that as well.
Number five, are you still with me? I am onto number five. We are gonna calculate a conventional loan in this example. Here's what's so important, and why I've told you you would probably not wanna even attempt at this. On a conventional loan, you have so many options. Right now, I'm gonna talk to you about the monthly option. And I'm gonna give you an example and a calculation, but, but, but, but, the RD and the FHA, those are what they are with the exception of certain situations such as more down payment, things like that, okay? But they are what they are, for the most part.
With conventional, your PMI, it's not just it is what it is. It's based on your credit score, your debt-to-income before the calculation of the MI, your zip code goes into effect, purchase versus refinance, of course, we're talking purchase today, loan term, right, loan term, 10, 15, 20, 25 or 30 year. Also, how many borrowers right? That also makes a difference, and loan amounts, and I'm probably forgetting something as well. But all those things go into this calculation. How in the world are you gonna know that if you don't have a loan officer and you're not in process and they don't have all your details? You're not, that's the point.
But let's assume you have all of the data. We have a $100,000 loan amount. We're talking about PMI, private mortgage insurance. This is not an MIP calculation. $100,000 loan amount, purchase, and there's not gonna be any upfront. Right now we're talking monthly only. So let's say if the calculation is a .47% calculation. So we've got, $100,000 loan times .7% calculation, divide that by 12, we've got a monthly PMI that's added to your monthly payment, for this example, of $39.17. 39, 17. And we're talking conventional, so right now, we're not talking upfront.
Five, four, three, two, one, we're still there. Okay great, oh, hi, great. Welcome to number six, here we are. There are so many options with PMI and a conventional loan. There is your upfront, but that's called a single premium. If you choose to pay the upfront, you don't have the monthly. Remember? The calculations which we just did with RD and FHA, we had upfront and monthly? Well, with conventional, if you qualify, you can actually choose single premium, upfront, one-time payment, refundable or not, will affect that pricing, and if you do that, then you have no monthly at all. Most people do not know that exists, and in many situations, that's my favorite option and will save you the most amount of money. It is significantly, or it is a significant reduction on the overall cost of the mortgage insurance when you take that option. And you can do that with as little as a 3% down payment.
So yes, you can have a 3% down payment, and there's a way to not have monthly PMI. Yes, that is correct. Then you have your monthly which everybody knows about, and we just did an example of a calculation of that. We also have the other option which is called lender paid, where you basically pay a higher interest rate, yes, for the life of the whole loan, but you pay a higher interest rate and your lender basically pays the mortgage insurance for you.
I made a little cheat sheet for you and I'm gonna put it as a link that you can download. It's MIP, PMI ranges, and like I said, it's a little cheat sheet that I made for you guys that hopefully can help you have at least a general idea of everything we've gone through in this video today. So I will put that in the bio and/or the comments below, click that, and I hope it helps.
Drop me a comment below. Hey, drop me a comment below. Type yes in all caps if this video has helped you and you have a better idea of what the heck PMI is versus MIP and an idea of what all that stuff means and how to calculate it. Yes, Y-E-S.If you like this video, please give me a thumbs up. If you didn't, give me a thumbs down. Be sure to leave a comment 'cause I do appreciate the feedback, and let's connect.
My Insta is @_theRealStephanieWeeks, and I look forward to your comments as well as your direct messages. Have a great one, guys, and thanks again for tuning in. Check out these other videos for more information.
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