FHA Mortgage Insurance

FHA mortgage insurance varies from 0.45% to 1.05% of the loan amount. It usually remains for the life of the loan.

NerdWalletJanuary 5, 2021
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Mortgage insurance protects lenders from losing money if you default on the loan. Most lenders require private mortgage insurance (PMI) for conventional loans when the home buyer makes a down payment of less than 20%. The same goes for refinancers with less than 20% equity.

All FHA loans have mortgage insurance, regardless of down payment amount.

» MORE: What is mortgage insurance?

The list is here.

See 2021’s best mortgage lenders and so much more. All backed by tons of nerdy research.

View the winners

How much does FHA mortgage insurance cost?

A Federal Housing Administration-backed loan requires an upfront premium, or fee, of 1.75% of the loan amount. You can:

  • Include that premium in your FHA closing costs, if you have the cash.

  • Or you can roll it into your loan amount, which increases your monthly payments slightly because you're borrowing more.

In addition to the upfront premium, you’ll pay a monthly premium that is added to your mortgage payments. This fee varies from 0.45% to 1.05% of the loan amount, per year, depending on:

  • The loan amount.

  • The size of your FHA down payment.

  • The term (the number of years the loan is financed for).

» MORE: Calculate your FHA mortgage insurance and monthly payments

FHA insurance vs. PMI costs

Which costs less per month, FHA mortgage insurance or private mortgage insurance? The answer depends on your credit score.

FHA monthly mortgage insurance payments are lower for borrowers with credit scores under 720, according to the Urban Institute. But monthly payments for PMI are slightly less for borrowers with credit scores of 720 to 739, and significantly less for borrowers with credit scores of 740 and higher. You can estimate the cost by using a PMI calculator.

» MORE: FHA loan requirements

Removing mortgage insurance

The insurance requirement is a key difference between FHA and conventional loans. With a conventional loan, private mortgage insurance may be canceled after you have gained sufficient equity (usually 20%). It’s canceled automatically after your equity reaches 78% of the purchase price.

FHA mortgage insurance can't be canceled if you make a down payment of less than 10%; you get rid of FHA mortgage insurance payments by refinancing the mortgage into a non-FHA loan. When you put 10% or more down on an FHA loan, you pay mortgage insurance premiums for 11 years rather than the life of the loan.

» MORE: How much home can you afford?

We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines, and avoid disclosing personal or sensitive information such as bank account or phone numbers. Any comments posted under NerdWallet’s official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise.