With a conventional mortgage loan, if you’re planning to use a down payment of less than 20% (or in a refinance you have less than 20% equity) you must pay mortgage insurance. You have a few options. Two of the most common are Option #1- lender paid mortgage insurance – choose a higher mortgage rate in exchange for no monthly mortgage insurance. Option #2- monthly mortgage insurance – choose a lower mortgage rate and pay the mortgage insurance monthly as part of your payment.
With an FHA loan, regardless of your down payment, you’re required to pay mortgage insurance. On FHA loans, every homebuyer will pay the same mortgage insurance amount. FHA has an upfront-mortgage-insurance, which is 1.75% financed into your mortgage loan. FHA loans also have a .85% charge for monthly mortgage insurance. If you are putting 10% or more down, then the monthly MI will be .80% – these amounts apply to 30year loans with FHA.