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FHA Mortgage Insurance

The annual FHA mortgage insurance premium varies from 0.15% to 0.75% of the loan amount. It usually remains for the life of the loan.

Robin Rothstein
Chris Jennings
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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 homeowners who refinance with less than 20% equity.
FHA loans also have mortgage insurance. However, unlike PMI on conventional loans, FHA borrowers must pay it regardless of how much they put down.
» MORE: What is mortgage insurance?

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 cover this one-time cost using one of two methods:
  • Include the premium in your FHA closing costs, if you have the cash.
  • 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 mortgage insurance premium, or MIP, that is added to your mortgage payments. Effective for mortgages endorsed for FHA insurance on or after March 20, 2023, the annual premium ranges from 0.15% to 0.75% of the average outstanding loan balance. The fee varies depending on:
  • The loan amount.
  • The size of your FHA down payment.
  • The term (the number of years for which the loan is financed).
Most homebuyers will pay 0.55% for their annual MIP, according to the FHA.
» MORE: Calculate your FHA mortgage insurance and monthly payments

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FHA insurance vs. PMI costs

Which costs less per month, FHA mortgage insurance or private mortgage insurance? The answer depends on your credit score.
Borrowers with a 96.5% loan-to-value ratio — or a 3.5% down payment — pay less in FHA monthly mortgage insurance than they would in PMI if their credit score is under 760, according to the Urban Institute. And PMI is only slightly more cost-effective for borrowers with credit scores above 760. 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.

Conventional loans

  • When can you cancel PMI? With a conventional loan, you may cancel private mortgage insurance after you’ve gained sufficient equity (usually 20%). You’ll need to contact your mortgage servicer to request the cancellation. 
  • Does PMI cancel automatically? PMI is only canceled automatically after your principal balance reaches 78% of the purchase price.

FHA loans

  • If you put down less than 10%: FHA mortgage insurance can't be canceled. You can get rid of FHA mortgage insurance payments by refinancing the mortgage into a non-FHA loan.
  • If you put down more than 10%: You’ll pay mortgage insurance premiums for 11 years rather than the life of the loan. The premiums will automatically cancel after this period. 
» MORE: How much home can you afford?

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Min. credit score

620

Min. down payment

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