Quick answer: A 400,000 USD home with 3.5% down has a base loan of 386,000; adding the 1.75% upfront MIP (6,755) gives 392,755, and at 6.5% over 30 years the payment is 2,482.48 plus 176.92 MIP, or 3,117.73 with tax and insurance.
How it's calculated
FHA loans need at least 3.5% down with a credit score of 580 or more. The upfront MIP is 1.75% of the base loan and is usually added to the loan; principal and interest use M = P·r ÷ (1 − (1 + r)^−n).
The annual MIP rate comes from HUD Mortgagee Letter 2023-05. For terms over 15 years and base loans up to 726,200 USD it is 0.50% at 95% LTV or less and 0.55% above; for larger loans 0.70% and 0.75%. For 15-year terms it is 0.15% at 90% LTV or less and 0.40% above (larger loans: 0.15% up to 78%, 0.40% up to 90%, 0.65% above).
With 10% or more down (LTV 90% or less) the annual MIP stops after 11 years; otherwise it lasts for the life of the loan. FHA loan limits vary by county and change every year, so check HUD's limit for your area. For a loan in the Gulf, use the mortgage calculator.
Worked examples
- 400,000, 3.5% down, 6.5%, 30 years: loan 392,755 → P&I 2,482.48, MIP 0.55% → 176.92
- Add 4,000 tax and 1,500 insurance a year: 2,482.48 + 176.92 + 333.33 + 125.00 = 3,117.73
FHA annual MIP, terms over 15 years (ML 2023-05)
| Base loan | LTV ≤ 95% | LTV > 95% |
|---|---|---|
| Up to 726,200 | 0.50% | 0.55% |
| Over 726,200 | 0.70% | 0.75% |
Frequently asked questions
Can I cancel FHA mortgage insurance?
If you put 10% or more down, the annual MIP ends after 11 years. With less down it lasts for the life of the loan unless you refinance into a conventional loan.
Is the upfront MIP refundable?
Part of it may be credited if you refinance into another FHA loan within three years; otherwise it is not refunded.
Does this apply outside the US?
No. FHA is a US federal program. For Gulf home finance use the mortgage calculator.
What credit score do I need for an FHA loan?
580 or more qualifies for 3.5% down. Scores from 500 to 579 need at least 10% down, and lenders may set higher limits of their own.
What is the difference between upfront and annual MIP?
Upfront MIP is a one-time 1.75% of the base loan, usually added to the loan. Annual MIP is charged yearly and paid in monthly parts.
Is FHA cheaper than a conventional loan?
It depends. FHA often helps with a lower credit score or small down payment, but with strong credit, a conventional loan may cost less overall.