An FHA loan is a mortgage insured by the Federal Housing Administration, a U.S. government agency. FHA loans are designed for borrowers with lower credit scores or smaller down payments. They require a minimum down payment of 3.5% for borrowers with credit scores of 580 or higher, and 10% for scores between 500 and 579.

What is MIP on an FHA loan?

MIP stands for Mortgage Insurance Premium. FHA loans require both an upfront MIP (currently 1.75% of the loan amount, financed into the loan) and an annual MIP (typically 0.55% of the loan balance for most borrowers) paid monthly. MIP protects the lender in case of borrower default.

What is the minimum down payment for an FHA loan?

The minimum down payment for an FHA loan is 3.5% of the purchase price if your credit score is 580 or higher. If your credit score is between 500 and 579, a 10% down payment is required. Down payment funds can come from savings, gifts from family, or down payment assistance programs.

How long do I pay MIP on an FHA loan?

For FHA loans with a down payment of less than 10%, you must pay annual MIP for the entire life of the loan. If you put down 10% or more, MIP can be removed after 11 years. Many borrowers refinance into a conventional loan once they reach 20% equity to eliminate mortgage insurance altogether.

FHA Loan Calculator

Home Price ($)

Down Payment (%)

Minimum 3.5% for FHA. Down payment: $10,500

Interest Rate (%)

Loan Term (years)

Annual Property Tax ($)

Annual Homeowner's Insurance ($)

Annual MIP Rate (%)

Upfront MIP (1.75%) is financed into the loan.

Total Monthly Payment

$0.00

Principal & Interest

Monthly MIP

Property Tax

Insurance

Total Loan Amount (with UFMIP)

Total Cost Over Loan Life

Monthly Payment Breakdown

Understanding FHA Loans

FHA loans are government-backed mortgages designed to make homeownership accessible to first-time buyers and those with modest incomes or credit histories. Insured by the Federal Housing Administration, these loans allow down payments as low as 3.5 percent and accept credit scores that conventional lenders often reject. Because the government insures the lender against loss, banks and mortgage companies can offer more favorable terms than they otherwise would to higher-risk borrowers.

The trade-off for this accessibility is mortgage insurance. FHA borrowers pay an upfront mortgage insurance premium of 1.75 percent of the loan amount, which is typically rolled into the loan balance, plus an annual MIP that ranges from 0.45 percent to 0.85 percent depending on the loan term, amount, and loan-to-value ratio. For most borrowers putting down 3.5 percent on a 30-year loan, the annual MIP is currently 0.55 percent. Unlike conventional PMI, FHA annual MIP generally cannot be removed for the life of the loan when the down payment is below 10 percent.

When evaluating an FHA loan, look beyond the monthly principal and interest payment. Your total housing cost includes the MIP, property taxes, and homeowner's insurance. Lenders use this total when calculating your debt-to-income ratio, which FHA guidelines cap at 43 percent for most borrowers, though exceptions exist up to 50 percent. Use this calculator to see the full picture of your FHA monthly obligation before you start shopping for a home.

Financial Disclaimer: This calculator provides estimates for informational purposes only. Actual FHA loan payments depend on your credit score, lender fees, exact MIP rates, and other factors. This is not financial advice. Consult a qualified mortgage professional before making home-buying decisions.

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