Upfront mortgage insurance premium (UFMIP)

UFMIP is the one-time upfront mortgage insurance fee charged on FHA loans, equal to 1.75% of the base loan amount, charged at closing. On a $200,000 base loan, UFMIP is $3,500.

How it works: in most cases, UFMIP is rolled into the financed loan amount rather than paid in cash. The base loan plus the UFMIP becomes the actual financed loan, and the borrower pays interest on the combined amount over the life of the loan. So while UFMIP doesn't show up as cash required at closing, it adds to the monthly payment because the financed balance is larger.

Why it matters: the rolled-in UFMIP affects the all-in cost of an FHA loan. A borrower with a $200,000 base loan ends up paying interest on $203,500 over 30 years. At 7%, the additional financing cost is roughly $4,800 in extra interest over the life of the loan, on top of the $3,500 UFMIP itself. The PITI calculator at /tools/mortgage-payment models this rolling-in math.

Common gotcha: UFMIP can technically be paid in cash at closing instead of financed, but in practice the cash option is rarely chosen, most borrowers prefer to preserve cash for reserves and the down payment. The borrower can also receive a partial UFMIP refund if they refinance from one FHA loan to another within the first three years; the refund schedule is published by HUD and decreases month by month.