FHA Mortgage Insurance: How MIP Works and What It Costs

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FHA loans help many buyers get into a home with a modest down payment and more flexible credit guidelines. Part of what makes that possible is mortgage insurance. If you are considering an FHA loan, understanding how this insurance works will help you compare it with other options and plan for the long run.

What FHA Mortgage Insurance Does

FHA mortgage insurance, called the mortgage insurance premium or MIP, protects the lender if a borrower stops making payments. You pay for it, but it is what allows FHA lenders to offer loans with as little as 3.5% down for borrowers with a credit score of 580 or higher.

FHA mortgage insurance comes in two parts.

Upfront Mortgage Insurance Premium

The upfront premium is 1.75% of the base loan amount. Most borrowers choose to add it to their loan rather than pay it in cash at closing, which keeps upfront costs lower but slightly increases the loan balance.

Annual Mortgage Insurance Premium

The annual premium is divided into twelve parts and included in your monthly mortgage payment. The rate depends on several factors:

Your loan amount
Your down payment, which determines your loan-to-value ratio
Your loan term, such as 15 or 30 years

Generally, a larger down payment and a shorter term lead to a lower annual premium. Your loan officer can show you the exact figure for your scenario on your Loan Estimate.

HUD’s current FHA MIP rates

HUD publishes these figures in Appendix 1.0 of its FHA handbook, last changed by Mortgagee Letter 2023-05 for loans endorsed on or after March 20, 2023. They still apply in 2026.

Upfront premium: 1.75% of the base loan amount on most FHA loans.

Annual premium, loan terms longer than 15 years

Base loan amount	Loan-to-value	Annual MIP	How long
$726,200 or less	90% or less	0.50%	11 years
$726,200 or less	Over 90% up to 95%	0.50%	Life of the loan
$726,200 or less	Over 95%	0.55%	Life of the loan
Over $726,200	90% or less	0.70%	11 years
Over $726,200	Over 90% up to 95%	0.70%	Life of the loan
Over $726,200	Over 95%	0.75%	Life of the loan

Annual premium, loan terms of 15 years or less

Base loan amount	Loan-to-value	Annual MIP	How long
$726,200 or less	90% or less	0.15%	11 years
$726,200 or less	Over 90%	0.40%	Life of the loan
Over $726,200	78% or less	0.15%	11 years
Over $726,200	Over 78% up to 90%	0.40%	11 years
Over $726,200	Over 90%	0.65%	Life of the loan

“Base loan amount” means the loan before the upfront premium is added. HUD’s 2023 letter ties the loan-size cutoff to the national conforming loan limit, so if your loan sits near $726,200, ask your loan officer which tier applies. Your credit score doesn’t change FHA mortgage insurance. Your payment estimates are on the FHA calculator, and your Loan Estimate shows the exact figures.

Source: HUD Mortgagee Letter 2023-05, Appendix 1.0. Checked October 22, 2026.

How Long You Pay It

This is one of the biggest differences between FHA and conventional loans. On a conventional loan, private mortgage insurance can typically be removed once you reach 80% loan-to-value. FHA works differently. If your loan starts above 90% of the home’s value, the annual premium stays for the life of the loan. At 90% or below, it ends after 11 years. Check the terms of your specific loan.

Ways to Eventually Drop MIP

If your FHA mortgage insurance is set to last for the life of the loan, the most common way to remove it is to refinance into a conventional loan once you have built enough equity. Your equity can grow through regular payments, extra principal payments and rising home values. If you reach 20% equity, a conventional loan may let you avoid mortgage insurance entirely. Whether a refinance makes sense depends on current rates, closing costs and how long you plan to stay.

Two MIP rules when you refinance an FHA loan

Upfront premium credit: if you refinance one FHA loan into another within three years, HUD credits part of the upfront premium you paid on the old loan toward the new one. The credit shrinks each month and ends at three years.
Older loans on a streamline: if HUD endorsed your current FHA loan on or before May 31, 2009, a streamline or simple refinance carries a 0.01% upfront premium and a 0.55% annual premium. Every other FHA refinance pays the standard rates above.

A licensed loan officer can work out both from your current loan statement.

Is FHA Still Worth It?

For many buyers, yes. FHA loans can be a great fit if:

Your credit score is still building
You have limited savings for a down payment
Your debt-to-income ratio is on the higher side
You want a path to ownership sooner rather than later

If you have strong credit and can put down a bit more, a conventional loan may cost less over time because PMI can be removed. Comparing both side by side is the best way to decide.

How MIP Fits Into Your Budget

When you compare loan offers, look at the full monthly payment, including principal, interest, property taxes, homeowners insurance and mortgage insurance. Because the upfront premium is usually financed, it adds a little to your loan balance and therefore to your monthly principal and interest as well. Seeing all of these pieces together helps you judge whether an FHA loan or another option fits your budget better, both now and several years down the road.

Questions to Ask Your Loan Officer

What would my upfront and monthly mortgage insurance be on an FHA loan?
How does that compare with PMI on a conventional loan for my situation?
How long would my MIP last based on my down payment?
What would I need to do to refinance out of MIP later?

Learn more on our FHA home loan page, then reach out to FLO Mortgage to compare your options with a loan officer.

FHA mortgage insurance: common questions

How much is FHA mortgage insurance in 2026?

Most FHA loans carry an upfront premium of 1.75% of the base loan amount. Most 30-year loans of $726,200 or less pay an annual premium of 0.50% or 0.55%, depending on loan-to-value. Larger loans and 15-year terms use different rates.

How long does FHA mortgage insurance last?

If your loan starts above 90% of the home’s value, the annual premium lasts for the life of the loan. At 90% or below, it ends after 11 years.

Can I remove FHA mortgage insurance?

You can refinance into a conventional loan once you have enough equity, or wait out the 11 years if your loan started at 90% of the home’s value or less.

Does my credit score change my FHA mortgage insurance?

No. HUD sets FHA mortgage insurance by loan amount, loan-to-value and loan term, not by credit score.

Do I get part of my upfront premium back when I refinance?

If you refinance from one FHA loan into another within three years, HUD credits part of your old upfront premium toward the new one. The credit drops each month until it ends at three years.

Is FHA mortgage insurance different on a streamline refinance?

Only for loans HUD endorsed on or before May 31, 2009. Those streamline at a 0.01% upfront premium and a 0.55% annual premium. All other streamlines pay the standard rates.

Have questions about your next move?

A FLO Mortgage loan officer can walk through your options, run real numbers and help you choose a loan that fits.

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This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage arranges FHA loans through partner lenders. MIP figures come from HUD Handbook 4000.1, Appendix 1.0 (Mortgagee Letter 2023-05), checked October 22, 2026, and may change. FLO Mortgage is licensed as a mortgage lender in Florida (MLD2621) and Georgia (#1835856), Company NMLS #1835856; Broker Owner Joy McCoy Flores, NMLS #1096400. Equal Housing Opportunity.