FHA Mortgage Insurance Premium Explained

If you’re looking at an FHA loan, you’re going to hear the term MIP a lot. It usually shows up right next to your monthly payment, and for many buyers, it raises questions right away.

What is MIP?

Why do I have to pay it?

How much does it cost?

And does it ever go away?

At 14 Days To Close, we explain FHA MIP every day because it’s one of the most misunderstood parts of FHA loans. Here's a breakdown.

What Is FHA MIP

MIP stands for Mortgage Insurance Premium. It’s required on all FHA loans. If you’re getting an FHA mortgage, MIP isn’t optional. The purpose of MIP is simple. It protects the lender if the loan goes into default. Because FHA loans allow lower credit scores and smaller down payments, the program uses mortgage insurance to offset that risk.

For buyers, MIP is just another part of the monthly payment, similar to property taxes or homeowners insurance.

The Two Parts of FHA MIP

FHA mortgage insurance comes in two parts. Understanding both makes everything else easier.

Upfront MIP

The upfront mortgage insurance premium is usually 1.75% of the loan amount. Most buyers don’t pay this out of pocket. Instead, it’s rolled into the loan balance and paid over time.

For example, if your loan amount is $300,000, the upfront MIP would be $5,250. That amount typically gets added to the loan instead of being paid at closing.

Annual MIP

The annual MIP is what most people think of when they hear PMI. It’s charged yearly but paid monthly as part of your mortgage payment.

The exact amount depends on your loan amount, your loan term, and your loan-to-value ratio.

How Much FHA MIP Costs Each Month?

For most standard FHA loans, annual MIP usually ranges between 0.45% and 0.85% of the loan amount per year. That amount is divided into monthly payments.

Here’s a simple example:

If you borrow $300,000 and your MIP rate is 0.55%, that equals $1,650 per year, or about $137 per month.

The exact number can vary, but this gives you a realistic expectation. At 14 Days To Close, we always show buyers the full monthly payment upfront, including MIP, so there are no surprises later.

How Long You Have to Pay FHA MIP

How long you pay FHA MIP depends on how much you put down. If you put less than 10% down, you’ll pay MIP for the life of the loan. That means it stays in place unless you refinance or sell the home.

If you put 10% or more down, MIP drops off after 11 years. There’s no automatic cancellation at 20% equity like conventional loans. FHA MIP follows fixed rules, even if your home value increases.

Why FHA MIP Lasts Longer Than Expected

FHA loans are designed to help buyers who may not qualify for conventional financing yet. Because the program takes on more risk, the mortgage insurance stays in place longer.

The tradeoff is access.

FHA loans often allow lower credit scores, smaller down payments, and higher debt-to-income ratios. For many buyers, MIP is the cost of buying now instead of waiting years.

Can FHA MIP Be Removed?

FHA MIP doesn’t fall off automatically for most buyers, but that doesn’t mean you’re stuck forever. The most common way buyers remove FHA MIP is by refinancing into a conventional loan once they qualify. This usually requires improved credit and enough equity.

Other ways FHA MIP ends include selling the home or paying off the loan.

This is why planning ahead matters. At 14 Days To Close, we help buyers think through whether FHA is a short-term solution or part of a longer plan.

Is FHA MIP Worth It?

For many buyers, yes.

FHA MIP can feel frustrating at first, but it often makes homeownership possible much sooner. Instead of waiting to have perfect numbers, buyers can move forward and start building equity. The problem isn’t FHA MIP itself. The problem is choosing it without understanding how it works.

FHA MIP vs Conventional PMI

Conventional PMI can usually be removed once you reach enough equity. FHA MIP follows stricter rules and often lasts longer. However, conventional loans usually require higher credit scores and more money down. FHA MIP exists because the program is more flexible upfront.

Neither option is right for everyone. The best choice depends on your numbers and your goals.

How to Decide If FHA MIP Makes Sense for You

Every buyer’s situation is different. Credit scores, savings, income, and long-term plans all matter. At 14 Days To Close, we help buyers compare FHA and conventional loans side by side with real numbers. We don’t just look at today’s payment. We look at what makes sense over time.

You can apply online anytime, schedule a call to talk through options, or reach out when questions come up at (813) 343-4775. We’re available nights and weekends because buying decisions don’t only happen during business hours.

Ready to See How FHA MIP Would Actually Affect You?

FHA MIP isn’t good or bad on its own. It’s just a tool. What matters is how it fits your budget, your credit, and your timeline. For some buyers, FHA is the fastest path into a home. For others, a different loan makes more sense. You won’t know which camp you’re in until you look at real numbers.

That’s exactly what we do at 14 Days To Close. We don’t guess. We walk through your options, explain the tradeoffs in plain English, and help you decide what actually works for you, not what sounds good on paper.

If you want clarity without waiting days for a callback, you can skip the line and schedule a call with our team. We’re available nights and weekends, because buying decisions don’t always happen during banker hours.