How an FHA loan's payment is actually built
An FHA loan is a mortgage underwritten to rules set by the Federal Housing Administration and insured by HUD, which is what lets lenders accept a smaller down payment and a thinner credit file than most conventional loans require. The price minus the down payment gives the base loan, the amount actually borrowed before anything FHA-specific gets added. From there, two extra costs sit on top of an ordinary repayment schedule: an upfront premium added once, and an annual premium billed every month for as long as the rules say it must run.
Principal and interest still follow the standard repayment formula, M = P × r(1 + r)n ÷ ((1 + r)n − 1), where P is the loan actually being repaid (the base loan plus UFMIP if it was financed in), r is the annual rate divided by 12, and n is the term in months. The calculator above adds the monthly MIP, and anything typed into taxes or insurance, on top of that P&I figure to reach the total monthly payment shown at the top.
The 3.5% down payment, and the credit score behind it
FHA's headline feature is a minimum down payment of 3.5% of the price, available to borrowers with a FICO credit score of 580 or above. Fall between 500 and 579 and the FHA minimum rises to 10% down instead; below 500, FHA will not insure the loan at all. Individual lenders are free to set a higher bar than HUD's own floor, called an overlay, so a 580 score meeting the technical FHA minimum does not guarantee approval everywhere; it sets the floor, not a guarantee.
The upfront premium: 1.75% due once, at closing
Every FHA loan carries an upfront mortgage insurance premium, UFMIP, equal to 1.75% of the base loan amount, collected once at closing rather than spread across the term. On the calculator's own default, a $300,000 price at 3.5% down, that is a $289,500 base loan and a $5,066.25 premium. Almost every borrower finances it straight into the loan rather than paying cash, which is why the toggle above the results defaults to "financed": it raises the loan slightly, to $294,566.25 in that example, and interest then runs on the larger figure for the rest of the term. Paying it in cash at closing keeps the loan, and the interest charged on it, at the smaller base figure instead, at the cost of a bigger cheque on completion day.
Annual MIP: the ongoing cost, priced by loan size, term and LTV
Annual MIP is charged as a percentage of the loan balance, billed monthly, and the rate itself depends on three things: the loan term, the loan-to-value ratio (the base loan against the price), and whether the base loan sits above or below a fixed $726,200 split HUD set in 2023 and has not moved with the yearly loan-limit updates since. For most 30-year FHA loans under that figure, the rate is 0.50% a year with 10% or more down, or 0.55% with less; 15-year loans, and loans with a lower loan-to-value, earn noticeably cheaper rates, down to 0.15% at 78% loan-to-value or below. Loans above the $726,200 split pay roughly 0.20 percentage points more at every tier. The calculator works out which tier applies automatically and shows the exact rate and monthly dollar figure in the results table above; this is a HUD Mortgagee Letter 2023-05 rule, not something that varies by lender.
The 10% cutoff: 11 years of MIP, or the life of the loan
One number decides how long that monthly MIP keeps being charged, and it is worth understanding before signing anything: a down payment of 10% or more gets MIP cancelled automatically after 11 years of payments, however much of the balance is left by then. Put down less than 10%, the FHA minimum of 3.5% included, and MIP runs for the entire life of the loan, with no loan-to-value threshold that ever switches it off on its own. That is a real, lasting difference from a conventional loan's private mortgage insurance, which cancels automatically once the balance falls to 78% of the original value regardless of the down payment that started it. The only way out of FHA's life-of-loan MIP once it applies is refinancing into a new loan, FHA or conventional, once enough equity or a strong enough credit file makes that worthwhile; that refinance carries its own closing costs and resets the rate to whatever is on offer at the time, so it is worth running the numbers rather than assuming it always pays for itself.
FHA against conventional: the same loan, compared honestly
The comparison table above takes the identical price, down payment, rate and term and prices it twice: once as an FHA loan with UFMIP and MIP, once as a conventional loan with no upfront premium and a typed PMI rate instead. Conventional PMI on a well-qualified borrower commonly runs cheaper per month than FHA's MIP at the same low down payment, and it cancels for good at 78% loan-to-value under the federal Homeowners Protection Act, whereas FHA's MIP may not cancel at all. Where FHA usually wins is upfront: a thinner credit file, a 3.5% floor rather than typical conventional minimums nearer 3% to 5%, and mortgage insurance pricing that does not move with credit score the way conventional PMI does. A shopper with a strong score and a slightly bigger down payment is the profile most likely to come out ahead on a conventional loan instead.
How much you can actually borrow: FHA loan limits
FHA will not insure a loan above a ceiling that varies by county, tied to local home prices. For 2026, the nationwide floor for one-unit homes in lower-cost counties is $541,287, and the ceiling in the most expensive counties is $1,249,125, with a higher limit again in Alaska, Hawaii, Guam and the US Virgin Islands. Most counties sit somewhere between those two figures rather than at either end, so the right number for a specific address always needs checking against HUD's own county-by-county list rather than assumed from the national floor or ceiling alone.
Who an FHA loan actually suits
FHA tends to suit buyers who are cash-constrained rather than credit-constrained: enough income to manage the monthly payment, but not enough saved for a conventional loan's usual down payment, or a credit file with a few dents that would price conventional PMI expensively. It suits first-time buyers particularly often, since saving a full 20% before a first purchase can take years longer than most people want to wait. It suits that profile less well the longer the loan runs at a low down payment, since a life-of-loan MIP has no natural exit besides refinancing; compare it against a conventional loan on the same numbers, using the table above, before assuming FHA is automatically cheaper.
Questions people ask
Can I ever get rid of FHA mortgage insurance without refinancing?
Only if the down payment was 10% or more, in which case MIP cancels automatically after 11 years of payments regardless of the balance. Below 10% down, including at FHA's 3.5% minimum, MIP runs for the life of the loan with no loan-to-value threshold that switches it off; refinancing into a new loan, FHA or conventional, is the only way out.
What is UFMIP and can I avoid paying it upfront?
UFMIP, the upfront mortgage insurance premium, is 1.75% of the base loan amount, due once at closing on every FHA loan. Almost every borrower finances it into the loan rather than paying cash, which raises the loan balance slightly and means interest runs on that larger figure for the rest of the term; paying it in cash at closing avoids both, at the cost of a bigger amount due on completion day.
Is FHA mortgage insurance more expensive than conventional PMI?
It depends on credit score, which is exactly what conventional PMI pricing moves on and FHA's MIP does not. A borrower with excellent credit often pays less overall on a conventional loan with PMI, since that PMI is priced cheaply for their file and cancels for good at 78% loan-to-value. A borrower with a thinner or lower credit file, or too little saved for a conventional down payment, is often better served by FHA's flat MIP pricing and 3.5% floor. The comparison table above runs both on the same numbers so the actual gap is visible rather than assumed.
What credit score does an FHA loan actually need?
HUD's own floor is a FICO score of 580 for the 3.5% minimum down payment, or a score between 500 and 579 with at least 10% down; below 500, FHA will not insure the loan. Individual lenders can and often do set a higher minimum than HUD's floor, so meeting the technical FHA minimum is not a guarantee of approval with every lender.
Do FHA loan limits mean I can't buy an expensive home with one?
It caps how much of the price FHA will insure, not the price itself; a buyer can still put down more cash to keep the loan under the limit, or use a different loan type above it. For 2026 the nationwide floor is $541,287 and the ceiling in the highest-cost counties is $1,249,125, with most counties somewhere in between depending on local home prices.
Does a bigger down payment on an FHA loan lower the MIP rate?
Yes, in two ways. Crossing 10% down switches the cancellation rule from life-of-loan to an automatic 11-year cutoff, and a lower loan-to-value more generally moves the annual MIP rate itself into a cheaper tier, particularly on a 15-year term. Both effects are worked out automatically in the results above from whatever down payment is set on the form.
Can I refinance out of FHA mortgage insurance later?
Yes: refinancing into a conventional loan, once enough equity and a strong enough credit file make it possible, removes FHA's MIP entirely and replaces it with conventional PMI or none at all above 20% equity. It is a genuine escape route from a life-of-loan MIP, but it comes with its own closing costs and a new rate set at the time of refinancing, so it is worth running the numbers rather than assuming it always pays for itself.
This calculator gives an estimate for a standard FHA-insured loan and is not financial, legal or lending advice. Actual premiums, rates, credit requirements and county loan limits depend on HUD's current rules, the lender and the borrower's file, and change over time. Speak to an FHA-approved lender before making a decision.