What fee is paid at closing and/or with monthly payments to insure an FHA loan?

The fee that is paid at closing and/or with monthly payments to insure an FHA loan is the FHA Mortgage Insurance Premium (MIP). This insurance is required for all FHA loans and serves to protect the lender in case the borrower defaults on the mortgage. The FHA insurance program is designed to make homeownership more accessible, particularly for first-time buyers and those with lower credit scores, which is why the MIP is mandated.

FHA MIP comes in two forms: an upfront premium that borrowers can pay at closing, and an annual premium that is divided into monthly payments. Both components help secure the loan and allow borrowers to take advantage of lower down payments and more favorable interest rates offered through FHA lending programs.

Other options do not apply to FHA loans specifically. While homeowner's insurance is typically required to protect the property itself, it does not safeguard the lender's interests in the same way MIP does. Loan guarantee fees are specific to VA loans rather than FHA loans. Private Mortgage Insurance (PMI) is relevant for conventional loans where the borrower is unable to put down 20% but is not applicable for FHA loans; they require the aforementioned MIP instead.