How to Use
Enter the home purchase price and your planned down payment (minimum 3.5% for borrowers with a 580+ credit score).
The loan amount is the purchase price minus your down payment; the upfront MIP of 1.75% is typically financed into the loan.
Input the annual interest rate from your lender quote or use current FHA rate averages.
Review your estimated monthly payment, which includes principal, interest, and the annual MIP divided into monthly installments.
Note the total MIP cost over the life of the loan - this is the key number to compare against a conventional loan with PMI.
Compare the total FHA cost to a conventional loan at 5% down to determine which is more economical for your credit profile.
What Is This Tool?
An FHA loan is a mortgage insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. FHA loans are designed for first-time buyers and borrowers with limited savings or imperfect credit. The minimum down payment is 3.5% with a credit score of 580 or higher - or 10% down if your score is between 500 and 579. Unlike conventional PMI (private mortgage insurance), which automatically cancels when you reach 20% equity, FHA MIP (Mortgage Insurance Premium) works differently. For loans originated after June 2013 with less than 10% down, the annual MIP is required for the life of the loan. The only way to remove it is to refinance into a conventional loan once you have built sufficient equity and qualify for better terms.
Why It Matters
FHA loans open homeownership to borrowers who cannot qualify for conventional financing - particularly those with credit scores below 680 or down payments under 10%. However, MIP adds meaningful long-term cost. Annual MIP on a $250,000 FHA loan runs roughly $115–$175 per month. Because MIP persists for the life of the loan on most FHA mortgages, the total added cost can exceed $25,000–$40,000 over 30 years. Understanding this before you buy helps you plan a refinance strategy once your equity and credit improve enough to qualify for conventional terms.