what is up front mortgage insurance ufmi 
up front mortgage insurance is an insurance premium that is collected typically on federal housing administration fha loans at the time the loan is initially made though similar it is not quite the same as private mortgage insurance pmi which is collected by a conventional private mortgage lender each month when a buyer s down payment on a home is less than 20 of the purchase price up front mortgage premiums are added to a pool of money that is used to help entities such as the fha insure loans for certain borrowers understanding up front mortgage insurance ufmi like pmi the purpose of fha mortgage insurance is to protect the lender when borrowers have minimal equity in their homes the risk to the lender that the borrower will default is higher because the borrower doesn t have as much to lose by walking away and letting the bank foreclose with mortgage insurance if you stop making your mortgage payments and walk away from your home the insurer will help your lender recoup its losses fha loans have lower down payment requirements as low as 3 5 of a home s price tag and less stringent income and credit requirements than conventional loans 1 so these loans require the payment of up front mortgage insurance which is collected at the time of closing since 2015 the rate for up front mortgage insurance has been 1 75 of the base loan price fha streamline refinance loans are charged a ufmip of 0 55 2 you have the option to pay this amount in cash when you close your loan but most people choose to roll it into their total mortgage amount if you can afford to pay the amount of up front mortgage insurance ufmi at the outset it s a good idea to do so if you decide to roll it into your loan it will be a lot more expensive in the long run in addition to the ufmi borrowers have to pay ongoing mortgage insurance premiums mip which range from 0 45 to 1 05 of the total mortgage 2 you ll have to pay this mortgage insurance until your loan to value ratio is low enough that is until you have paid off a certain amount of your mortgage when your equity is high enough in the case of an fha loan the percentage is 22 there is less risk for the lender should you walk away from the loan 3 at this time the insurance is no longer required those with loans greater than 15 years are required to make monthly mortgage insurance payments for five years if your mortgage is shorter than 15 years then the only requirement is the 78 loan to value ratio up front mortgage insurance premium payments are submitted directly to the u s department of housing and urban development hud and collected by the u s department of the treasury s automated collection service they go into an escrow account 4hud uses a secure internet collection portal to process collections electronically this automated collection service special considerationsmany people do not realize that premiums for up front mortgage insurance can usually be refunded on a pro rated basis if they paid it all at once and then sell their home within the first five to seven years of ownership in other words they may be entitled to a substantial refund even years after the fact if a homeowner received their fha loan before june 2013 they are eligible for a refund and cancelation of their up front mortgage insurance premium after five years a homeowner must have 22 equity in the property and all payments must have been made on time 5 homeowners with fha loans issued after june 2013 must refinance into a conventional loan and have a current loan to value of at 80 or more there are a few ways home buyers can avoid paying upfront mortgage insurance 