A reader asks, “Can I roll my upfront MIP on to my loan above the county loan limits? The limit in San Diego is $697500, can I roll the upfront MIP on to the loan or do I have to pay cash?”
Up front mortgage insurance payments, or UFMIP, have clearly defined rules as spelled out in HUD 4155.2. According to the rules, “The UFMIP remittance period begins on the date of loan settlement or the date of disbursement of the mortgage proceeds, whichever is later. UFMIP must be paid to FHA in a lump sum within 10 calendar days after the loan is closed.”
That lump sum can be paid in cash or rolled into the loan amount, but the borrower cannot split the two options and pay a portion in cash and finance the rest. FHA rules state, “The UFMIP must be either
• entirely financed into the mortgage, with the mortgage amount rounded down to a whole dollar (with the exception of instances in which the borrower chooses to pay up to 49.99 of the UFMIP in cash, in which case it would not then be reflected in the total mortgage amount), or
• paid entirely in cash and all mortgage amounts must be rounded down to a multiple of $1.00.”
To address the borrower’s specific question about loan limits and the UFMIP, we referenced HUD 4155.2, Chapter 7 Section 2.b, “UFMIP Payment Policy” which states the following:
“The UFMIP amount, that is the total mortgage amount, is not considered when determining compliance with statutory loan limits or LTV limits. The base mortgage amount must comply with the requirements. The total mortgage amount may exceed this limit by the financed UFMIP amount.” (Emphasis ours.)
One way to interpret the above statement is that the FHA understands the cost of doing business with an FHA guaranteed mortgage includes the UFMIP, so the borrower wouldn’t be penalized for including that payment in the home loan amount if it causes the loan to exceed the statutory limits or loan-to-value ratios. Note the language in the quote–the FHA recognizes a difference between the “base” loan amount and the “total” loan amount, which would be the sum of both the loan and the UFMIP included in that loan.
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