Planning to take out an FHA loan? Then you’ll also have to plan on paying mortgage insurance premiums (MIPs), both upfront and with your monthly payments.
This insurance protects the lender from losing money if you default on your loan. It’s also required for all FHA loans, regardless of the size of your down payment. This means you can’t dodge it with a 20% down payment like you can with private mortgage insurance (PMI) on conventional loans.
Here’s what to expect with FHA mortgage insurance, including how much it costs and how long you’ll have to pay it.
How much does FHA mortgage insurance cost?
FHA mortgage insurance is split into two parts: an upfront MIP and an annual MIP.
Upfront premium
An FHA-insured loan requires an upfront premium, or fee, of 1.75% of the loan amount. You can cover this one-time cost in one of two ways:
Include the premium in your FHA closing costs, if you have the cash.
Roll it into your loan amount, which increases your monthly payments slightly because you're borrowing more.
For example, say you purchase a home that costs $400,000. You’re able to make a 3.5% down payment, and you finance the remaining $386,000 with a 30-year FHA loan and 7% interest rate. In this case, the upfront MIP would cost you an additional $6,755.
Annual premium
In addition to the upfront premium, you’ll pay an annual premium that’s added to your mortgage payments. The annual premium ranges from 0.15% to 0.75% of the average outstanding loan balance. It varies depending on:
The loan amount.
The size of your FHA down payment.
The repayment term.
Most home buyers will pay 0.55% for their annual MIP, according to the FHA. For instance, going back to the $400,000 home purchase example above, the annual MIP would be 0.55%. This would add an additional $176 to each monthly payment.
FHA insurance vs. PMI costs
Which costs less per month, an FHA loan or a conventional loan with private mortgage insurance? As of September 2026, borrowers who put down 3.5% (a 96.5% loan-to-value ratio) pay less with an FHA loan than they would with a conventional loan and PMI, according to the Urban Institute. In fact, FHA loans come out ahead in every credit score band, though the gap shrinks as scores rise.
For example, the Urban Institute report found that a borrower with a credit score between 700 and 719 would pay about $2,783 a month with an FHA loan, compared with $2,892 for a conventional loan with PMI, a difference of $109. For scores of 760 and above, the two cost about the same. You can estimate your cost by using a PMI calculator.
» MORE: FHA loan requirements
Removing mortgage insurance
The insurance requirement is a key difference between FHA and conventional loans.
FHA loans
If you put down less than 10%: FHA mortgage insurance can't be canceled. You can get rid of FHA mortgage insurance payments by refinancing the mortgage into a non-FHA loan.
If you put down 10% or more: You’ll pay mortgage insurance premiums for 11 years rather than the life of the loan. The premiums will automatically cancel after this period.
Conventional loans
When can you cancel PMI? With a conventional loan, you can cancel private mortgage insurance after you’ve built enough equity (usually 20%). You’ll need to contact your mortgage servicer to request the cancellation.
Does PMI cancel automatically? PMI is only canceled automatically after your principal balance reaches 78% of the purchase price.
» MORE: How much home can you afford?
How to avoid or reduce mortgage insurance
If you’d like to skip or save on FHA mortgage insurance, here are some strategies to consider:
Make a bigger down payment
You’ll be stuck with mortgage insurance on FHA loans no matter what. But you can shorten the duration of the annual MIP to 11 years (instead of the full loan term) with a down payment of at least 10%.
Get another type of mortgage
Not all home loans require mortgage insurance. For example, neither VA loans nor USDA loans charge mortgage insurance. However, both come with their own set of fees, including a one-time funding fee for VA loans and both upfront and annual guarantee fees for USDA loans. These fees function similarly to mortgage insurance.
Consider a piggyback loan
Also known as an 80-10-10, this option means taking out two loans at the same time. The first is a conventional mortgage to cover 80% of the cost, while the second is either a home equity loan or home equity line of credit (HELOC) to finance another 10%. You’ll then pay the remaining 10% in cash. The second mortgage and cash payment add up to a down payment of 20%, so you’ll avoid PMI.
Look into lender-paid mortgage insurance (LPMI)
Some conventional loan lenders offer LPMI as a perk. With this option, the lender will cover the mortgage insurance premiums upfront, and you’ll pay for the service each month. The expense is typically calculated as part of your loan’s interest rate. While you’ll still technically be paying mortgage insurance, the monthly cost is often less than what you’d pay with PMI.
Refinance to a conventional loan
If you’ve built at least 20% equity in your home, you could refinance an FHA loan to a conventional mortgage without having to pay PMI. Even if you do get stuck with PMI, the overall cost could end up lower compared to what you’d pay with the FHA annual MIP. This is because you can cancel PMI after building at least 20% equity, while the annual MIP for an FHA loan can last for 11 years or the entire loan term, depending on your initial down payment.
