The Federal Housing Administration (FHA) requires borrowers to pay mortgage insurance premiums (MIP) to protect lenders against loss if a borrower defaults. Unlike conventional loans which use Private Mortgage Insurance (PMI), FHA loans utilize a specific structure involving both an upfront cost and an annual premium. This calculator helps you estimate these costs based on the latest HUD guidelines.
The Two Types of FHA MIP
When obtaining an FHA loan, you are responsible for two distinct types of insurance premiums:
Upfront MIP (UFMIP): This is a one-time fee paid at closing. For most FHA loans, this is set at 1.75% of the base loan amount. Most borrowers choose to finance this amount into their loan rather than paying it out of pocket.
Annual MIP: Despite the name, this premium is calculated annually but divided by 12 and added to your monthly mortgage payment. The rate depends on your loan term and your Loan-to-Value (LTV) ratio.
Current Annual MIP Rates (2024 Guidelines)
The Department of Housing and Urban Development (HUD) reduced annual MIP rates in 2023. The logic used in the calculator above reflects these current rates for standard loans:
Loan Term
Loan-to-Value (LTV)
Annual MIP Rate
Greater than 15 Years
Greater than 95%
0.55%
Greater than 15 Years
95% or Less
0.50%
15 Years or Less
Greater than 90%
0.40%
15 Years or Less
90% or Less
0.15%
How LTV Affects Your Rate
Your Loan-to-Value (LTV) ratio is the primary driver of your annual MIP rate. LTV is calculated by dividing your loan amount by the home's appraised value.
For example, if you make the minimum FHA down payment of 3.5%, your LTV is 96.5%. Because this is greater than 95%, you will qualify for the 0.55% annual MIP rate (on a 30-year term). If you put down 5% or more (LTV 95% or lower), your rate drops to 0.50%.
Can FHA MIP Be Removed?
Unlike conventional PMI, which falls off automatically once you reach 20-22% equity, FHA MIP rules are stricter. For FHA loans originated today:
If you put down 10% or more, MIP is removed after 11 years.
If you put down less than 10% (most borrowers), MIP stays for the life of the loan.
To remove MIP on a loan with less than 10% down, you typically must refinance into a conventional loan once you have sufficient equity.