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The FHA charges two mortgage insurance premiums: an upfront cost and a monthly premium.
The upfront cost is imposed on all FHA-backed loans regardless of the size of the down payment and amounts to 2.25 percent of the loan as of 2010. This cost is due when you take out the mortgage.
Do not let the size of the upfront mortgage insurance premium discourage you from taking out an FHA loan. Under FHA rules, you are allowed to increase the size of your mortgage to pay for the upfront premium.
If you put down less than 20 percent (10 percent on loans of 15 years or fewer), you must pay monthly premiums, which cost about 0.042 percent of the outstanding loan balance per month as of 2010.
You must continue to pay the monthly premiums until you reach 22 percent equity in your home and, for loans with terms exceeding 15 years, at least five years have elapsed since you started the mortgage.
When you take out an FHA-backed mortgage, you cannot be charged for private mortgage insurance by the lender.
CNN Money.com: FHA Loan Requirements Will Make it Harder to Get a Mortgage
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