Written by the Simply Approved Mortgages editorial team
Reviewed for program accuracy by our Simply Approved Mortgages underwriting desk — Licensed mortgage originators (NMLS) — Colorado & Florida. We summarize published federal program rules; we do not set them. This article is educational and is not a quote, approval, or commitment to lend.
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This guide explains FHA mortgage insurance cost and what to prepare before speaking with a mortgage professional.
FHA mortgage insurance has two parts: an upfront mortgage insurance premium (UFMIP) of 1.75% of the base loan amount, usually financed into the loan, and an annual mortgage insurance premium (MIP) collected monthly. There is no single annual rate. The annual MIP depends on the loan term, the base loan amount and the loan-to-value (LTV) ratio at origination, and the LTV also decides whether MIP lasts 11 years or the life of the loan.
What Is FHA Mortgage Insurance?
FHA mortgage insurance protects the lender, not the borrower, if an FHA-insured loan defaults. HUD sets the premiums; lenders collect them. It is required on every FHA forward mortgage regardless of credit score or down payment. You can learn more about general FHA loan requirements on our dedicated page.
Upfront Mortgage Insurance Premium (UFMIP)
The UFMIP is a one-time premium equal to 1.75% of the base loan amount on most FHA forward mortgages. For example, on a $300,000 base loan the UFMIP is $5,250. Most borrowers finance it, which adds it to the loan balance instead of paying it in cash at closing.
Annual MIP Rates by Term, Loan Amount and LTV
The annual MIP is a percentage of the average outstanding balance for each year, divided by 12 and added to the monthly payment. As of HUD's current premium schedule, the rate is set by three conditions:
| Loan term | Base loan amount | LTV at origination | Annual MIP | How long it lasts |
|---|---|---|---|---|
| More than 15 years | $726,200 or less | Above 95% | 0.55% | Life of loan |
| More than 15 years | $726,200 or less | 90.01%–95% | 0.50% | Life of loan |
| More than 15 years | $726,200 or less | 90% or less | 0.50% | 11 years |
| More than 15 years | Above $726,200 | Above 95% | 0.75% | Life of loan |
| More than 15 years | Above $726,200 | 90.01%–95% | 0.70% | Life of loan |
| More than 15 years | Above $726,200 | 90% or less | 0.70% | 11 years |
| 15 years or less | $726,200 or less | Above 90% | 0.40% | Life of loan |
| 15 years or less | $726,200 or less | 90% or less | 0.15% | 11 years |
| 15 years or less | Above $726,200 | Above 90% | 0.65% | Life of loan |
| 15 years or less | Above $726,200 | 78.01%–90% | 0.40% | 11 years |
| 15 years or less | Above $726,200 | 78% or less | 0.15% | 11 years |
*Source: HUD Mortgagee Letter 2023-05 premium schedule for forward mortgages with case numbers assigned on or after March 20, 2023, as carried in HUD Handbook 4000.1 Appendix 1.0 (Mortgage Insurance Premiums). Reviewed September 2026. Some programs and streamline refinances of older loans follow different schedules; your lender applies the table in effect for your case number.*
Illustrative example (mortgage insurance only, not a rate or payment offer): this example assumes a 30-year purchase with a $300,000 base loan and 3.5% down has an LTV above 95% and a base loan under $726,200, so the first-year annual MIP factor is 0.55%, roughly $1,650 for the year or about $137.50 a month, falling slightly as the balance is paid down. The same loan with 10% down would use 0.50% and MIP would end after 11 years. This example shows mortgage insurance only; it is not a quote, interest rate, or payment offer. Try the FHA MIP calculator with your own numbers.
How the 2023 MIP Reduction Changed Costs
HUD lowered annual MIP by 30 basis points for most new FHA forward mortgages with case numbers assigned on or after March 20, 2023 (Mortgagee Letter 2023-05). For a loan term longer than 15 years with a base loan amount of $726,200 or less, the annual MIP factor above 95% LTV went from 0.85% to 0.55%, and at 95% LTV or less from 0.80% to 0.50%. Loans endorsed before that date keep the premium schedule that applied to them.
When Does Annual MIP Stop?
For FHA loans with case numbers assigned on or after June 3, 2013, annual MIP lasts 11 years if the original LTV was 90% or less (10% or more down) and for the life of the loan if the original LTV was above 90%. The only way to remove life-of-loan MIP is to pay off or refinance the loan, for example into a conventional loan once you have enough equity, subject to lender approval. Existing FHA homeowners can compare FHA streamline refinance options.
FHA vs. Conventional Loans: When FHA Fits
FHA loans are insured by the Federal Housing Administration, which allows for more flexible qualification criteria compared to conventional loans. This includes lower minimum credit score requirements and a minimum down payment of just 3.5%. These features make FHA loans particularly attractive if you are a first-time homebuyer, have less-than-perfect credit, or have limited funds for a down payment. All loans are subject to lender underwriting and approval. You can also explore how FHA loans compare to conventional options in our FHA vs conventional comparison.
However, FHA loans always come with mortgage insurance (both UFMIP and annual MIP), which adds to the overall cost. Conventional loans, on the other hand, only require private mortgage insurance (PMI) if your down payment is less than 20%, and PMI can be canceled once you reach 20% equity. For some borrowers, a conventional loan may be more advantageous if they have a strong credit history and a larger down payment. The Consumer Financial Protection Bureau (CFPB) offers resources on different loan options on their CFPB guide to loan options.
Considering an FHA 203(k) renovation loan? These loans also include UFMIP and annual MIP, just like a standard FHA 203(b) purchase loan. Our guide to mortgage insurance costs on FHA 203(k) loans provides more details. You can also explore how an FHA 203(k) loan can help finance repairs into your home purchase.
What This Means for Florida and Colorado Buyers
The recent MIP reduction makes FHA loans a more financially appealing option for many first-time and moderate-income homebuyers in Florida and Colorado. While mortgage insurance is an inherent cost of FHA loans, this adjustment directly lowers your potential monthly expense, allowing you to qualify for more home or free up budget for other critical needs. It is crucial to remember that FHA loans still require an upfront mortgage insurance premium and annual mortgage insurance that will be part of your monthly payment.
At Simply Approved Mortgages, we specialize in helping you understand all aspects of FHA-insured loans. If you have questions about how these costs affect your budget or want to explore your eligibility, please reach out to us. We can help you compare loan options and understand the real closing costs involved. For personalized guidance, you can pre-qualify with us today.
How This Fits the Full FHA Picture
Mortgage insurance is a cost of the program, not an approval test. the main guide to FHA loan eligibility requirements covers what lenders check, and FHA income requirements and DTI shows how MIP factors into the payment used in your ratios.
Sources
These government publications are cited for FHA program background and general consumer education. FHA program rules described here are published by HUD and are not underwriting decisions; all loans remain subject to lender underwriting and approval. Simply Approved Mortgages LLC (NMLS #2620881) is a mortgage broker and is not HUD, FHA, or the CFPB, and is not affiliated with or endorsed by any government agency.
