If you’re getting a new FHA loan, you’ll have to pay for what’s called an Upfront Mortgage Insurance Premium, or Upfront MIP. The Upfront MIP is usually 1.75% of whatever the loan amount is.
So, for example, if you had an FHA loan amount of $300,000 then you’d have to pay an Upfront MIP fee of $5,250. Now typically, when getting an FHA loan, this upfront fee will be rolled into the loan itself meaning that instead of having a loan balance of $300,000 as in the previous example, your loan balance would be $305,250.
When applying for a VA loan, there is also an upfront fee which is referred to as the funding fee. Much like an FHA, the Funding Fee is based on a percentage of the loan amount.
The funding fee amount is influenced by several factors included which branch of the military you served, and also whether it’s your first time applying for a VA loan or whether you’ve had one before.
Typically the Funding will be 2.14% of the loan amount for first-time use. So, if you were applying for a VA mortgage loan of $300,000 for the first time, your VA funding fee would most likely be $6,420.
Just as in the FHA example, this upfront fee is almost always included into the loan amount.
In summary, it’s important to know about these upfront fees when you’re applying for an FHA or VA loan, so that you’re not confused if you see that your loan amount is a little bit higher than what you thought you were applying for.
