How FHA mortgage insurance is calculated
FHA loans carry two premiums, both set by HUD:
- Upfront MIP (UFMIP) — 1.75% of the base loan amount, normally added to the loan.
- Annual MIP — a yearly percentage paid monthly. Under HUD Mortgagee Letter 2023-05 (effective March 20, 2023), loans with terms over 15 years and base amounts up to $726,200 pay 0.50% with LTV at or below 95% and 0.55% above 95%. Other combinations (15-year terms, larger loans) have different rates — enter them in the override field.
Base loan = price − down payment
UFMIP = base loan × 1.75%
Total loan = base loan + UFMIP (P&I is calculated on this)
Monthly MIP ≈ base loan × annual MIP rate ÷ 12
HUD recalculates annual MIP each year on the average outstanding balance, so it declines slowly; we show the first-year amount.
How long MIP lasts
Under HUD Mortgagee Letter 2013-04, if your original LTV was 90% or less, annual MIP is paid for 11 years. Above 90%, it is paid for the life of the loan (up to 30 years). Refinancing into a conventional loan is the usual way to remove it.
Worked example
A $300,000 home with 3.5% down at 6.25% for 30 years, 0.89% property tax and $1,800 insurance:
| Base loan (96.5%) | $289,500 |
|---|---|
| Upfront MIP (1.75%) | $5,066.25 |
| Total loan | $294,566.25 |
| Principal & interest | $1,813.70 |
| Annual MIP 0.55% (289,500 × 0.55% ÷ 12) | $132.69 |
| Property tax + insurance | $372.50 |
| Total monthly payment | $2,318.88 |
| MIP duration | life of loan (LTV above 90%) |
FHA vs conventional
FHA accepts lower credit scores (down to 500 with 10% down, 580 with 3.5% down, per HUD Handbook 4000.1), but its mortgage insurance usually lasts longer than conventional PMI. With good credit and 5% or more down, compare against the conventional mortgage calculator with PMI.
Frequently asked questions
What is the FHA upfront MIP?
1.75% of the base loan amount. Most borrowers add it to the loan rather than paying cash.
Can FHA MIP be removed?
If your original LTV was 90% or less, annual MIP ends after 11 years. Above 90%, it lasts for the life of the loan unless you refinance into a non-FHA loan.
Are there FHA loan limits?
Yes. FHA sets maximum loan amounts by county each year. Check HUD’s FHA mortgage limits lookup for your area.
Sources
- U.S. Department of Housing and Urban Development, Mortgagee Letter 2023-05, “Reduction of Federal Housing Administration (FHA) Annual Mortgage Insurance Premium Rates” (February 22, 2023)
- U.S. Department of Housing and Urban Development, Mortgagee Letter 2013-04, “Revision of Mortgage Insurance Premium (MIP) Duration” (January 31, 2013)
- U.S. Department of Housing and Urban Development, Single Family Housing Policy Handbook 4000.1 (minimum required investment and credit score rules)
- U.S. Census Bureau, American Community Survey 2024 1-year estimates, table B25103 (median real estate taxes paid) and table B25077 (median value, owner-occupied units)