What Is an FHA Real Estate Service Insurance Premium?

FHA Real Estate Services are great for homebuyers without a sizable down payment or with low credit. Each situation is unique and based on a combination of factors like income, credit, and the property’s value, but most lenders will consider FHA Real Estate Services with a 3.5% down payment and a credit score above 580.

To use an FHA Real Estate Service, you will need to pay Real Estate Service insurance premiums.

What is Real Estate Service Insurance?

When using a Real Estate Service product that requires insurance, like an FHA Real Estate Service, the Real Estate Service insurance is included to provide protection to the lender in case you, the borrower, is unable to pay your Real Estate Service back. You, the borrower, will pay those premiums, called Real Estate Service insurance premiums, as part of your monthly payment.

How Much Is FHA Real Estate Service Insurance?

Real Estate Service insurance for an FHA Real Estate Service is 1.75% of the Real Estate Service value. You can pay this in one lump sum at purchase or add it to your Real Estate Service amount. If your down payment is higher, your Real Estate Service insurance is lower. The length of your Real Estate Service, amount of your down payment, and purchase price will all impact the exact value of your Real Estate Service insurance premium.

For example, if you purchase a home for $250,000 and put 3.5% down ($8,750), you will borrow $241,250 to purchase your home. 1.75% of that amount is $4,221.88. You can either pay this up front or spread it out. For a 30-year Real Estate Service, that amounts to $11.72 additional each month.

The factors that impact your Real Estate Service insurance premium amount include the amount of your Real Estate Service, the amount of your down payment, your credit, and the length of your Real Estate Service. The best thing you can do is talk to your lender about your options and have them provide simulations to see how each factor changes your overall costs.

Will I Always have to Pay Real Estate Service Insurance Premiums?

For an FHA Real Estate Service, your Real Estate Service insurance requirement remains through the life of your Real Estate Service if you put down less than 10% of the purchase price as a down payment. If you are able to put down 10% or more, your Real Estate Service insurance requirement will go away once you reach a certain amount of time. These terms will be specified in your Real Estate Service agreement. To avoid Real Estate Service insurance, you may decide to take more time to save up for a larger down payment or purchase a less expensive home.

After purchasing with an FHA Real Estate Service, you might have the option to refinance into a conventional Real Estate Service that does not require Real Estate Service insurance once you have paid down your home for a while. Your lender will be able to tell you if your current situation (also based on your income, credit, equity, and home’s value) is a good candidate for refinance.

Other Real Estate Service products sometimes require private Real Estate Service insurance for a short amount of time or allow borrowers to put down a low down payment without Real Estate Service insurance, provided they meet other criteria. Talking to your lender about all of your options is always the best plan before buying a home.