The FHA loan is the most misunderstood mortgage product in the United States. Lenders market its low 3.5% down payment prominently while burying the true cost of Mortgage Insurance Premium (MIP) in footnotes. This guide gives you the technical formula to calculate your exact FHA payment — including both upfront and annual MIP — with zero data collection on our end.
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An FHA loan is a mortgage insured by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). Because the federal government backstops these loans against default, approved lenders can offer them with more flexible qualification standards than conventional mortgages. The tradeoff is mandatory mortgage insurance that protects the lender — not you — in the event of default.
FHA loans are particularly relevant for first-time buyers, borrowers rebuilding credit, and those with limited savings for a down payment. The program has been operational since 1934 and has insured over 50 million mortgages since inception.
| Credit Score | Minimum Down Payment | On $350,000 Home |
|---|---|---|
| 580 and above | 3.5% | $12,250 |
| 500 to 579 | 10% | $35,000 |
| Below 500 | Not eligible | N/A |
FHA Mortgage Insurance Premium has two separate charges that dramatically increase your total loan cost:
1. Upfront MIP (UFMIP)
Rate: 1.75% of the base loan amount. Paid at closing or rolled into the loan balance. On a $338,000 loan (after 3.5% down on a $350,000 home), UFMIP = $5,915. This amount is added to your loan balance on day one.
2. Annual MIP
Rate: 0.55% to 1.05% depending on loan term, loan amount, and LTV. For most 30-year loans with less than 10% down on amounts under $726,200: 0.85% annually, divided by 12 and added to each monthly payment. On a $338,000 loan: $238/month added to your P&I payment every month.
FHA Payment Example
Home price $350,000 — 3.5% down — 6.75% rate — 30 years
For loans originated after June 3, 2013, the rules are straightforward and unfavorable for most borrowers:
| Down Payment | Loan Term | MIP Duration |
|---|---|---|
| Less than 10% | 30 years | Life of loan |
| Less than 10% | 15 years | Life of loan |
| 10% or more | 30 years | 11 years |
| 10% or more | 15 years | 11 years |
This is the primary financial reason borrowers refinance out of FHA loans once they accumulate 20% equity. A conventional loan eliminates PMI at 20% LTV automatically, whereas FHA MIP at below 10% down payment persists indefinitely regardless of how much equity you build.
The decision between FHA and conventional financing is a numerical exercise, not a preference. Three variables determine the outcome: your credit score, your available down payment, and your projected time in the home.
Borrowers with credit scores above 720 and 5% or more to put down will almost always find conventional financing cheaper over a 7-year horizon due to removable PMI. Borrowers with scores between 580 and 679 frequently find FHA rates low enough to offset the perpetual MIP for the first 5 to 7 years. Beyond that window, the permanent MIP erodes the advantage.
Why does this FHA calculator not ask for my email?
Because we do not sell leads. Every major mortgage calculator collects your contact information and sells it to lenders who will call you repeatedly. Our tool runs entirely in your browser. No data is transmitted to any server.
What is FHA MIP and how is it calculated?
FHA Mortgage Insurance Premium has two components: an upfront MIP of 1.75% of the loan amount paid at closing, and an annual MIP ranging from 0.55% to 1.05% depending on loan term, loan amount, and LTV ratio. For a 30-year loan with less than 10% down under the conforming loan limit, the annual MIP is 0.85%.
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 for borrowers with a credit score of 580 or higher. Borrowers with credit scores between 500 and 579 are required to put down at least 10%.
Does FHA MIP ever go away?
For FHA loans originated after June 3, 2013 with a down payment below 10%, annual MIP remains for the life of the loan. With a down payment of 10% or more, MIP is removed after 11 years. This is why many borrowers refinance into a conventional loan once they reach 20% equity.
How does an FHA loan differ from a conventional loan?
FHA loans are government-backed, allowing credit scores as low as 580 and down payments of 3.5%. Conventional loans require stronger credit (typically 620 minimum) but PMI is removable at 20% equity. FHA MIP at below 10% down is permanent, making conventional financing cheaper long-term for qualified borrowers.
The calculations and information on this page are for educational purposes only. Actual FHA loan terms, MIP rates, and eligibility requirements are set by HUD and may change. Consult a HUD-approved lender for loan-specific figures. Truly Free Mortgage Calculator does not collect personal data and does not connect users with lenders.