How Much FHA Mortgage Insurance Costs a First-Time Buyer Over Time

The Quick Read: The cost comes in two parts, an upfront premium of 1.75% of the base loan and an annual premium billed monthly. The upfront part is a one-time charge, usually financed into the loan. The annual part runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. How long it lasts depends mostly on your down payment. On a thirty-year loan above 90% LTV, it lasts for the full term. At 90% LTV or below, it ends after eleven years. All figures are subject to lender guidelines and full file review.

What Is FHA Mortgage Insurance, Really?

It is insurance that protects the lender if the loan goes bad. It does not protect you. Borrowers pay for it, and in return the program allows a low down payment and a lower credit floor than many other loans.

Across the wholesale programs Lendmire places files with, maximum financing on a purchase is 96.5% LTV. That means a 3.5% minimum investment from the buyer at a decision score of 580 or higher. The home must be your principal residence, one to four units. Seller or interested-party contributions can run to 6% of the price.

That low entry point is why the insurance exists. The lender takes more risk at 96.5% financing, so the program charges for the cover. Anyone reading about FHA loan programs should treat the premium as part of the loan’s structure. It is not an add-on you can negotiate away.

First-time status does not change the structure. A repeat buyer and a first-time buyer on the same loan terms face the same premium schedule.

The Two Charges at a Glance

The annual range is wide because the inputs are wide. Shorter terms and lower LTVs sit toward the bottom. Longer terms, higher LTVs and larger loans sit toward the top. Check the current schedule before you plan around any number, since the program adjusts it from time to time.

How the Upfront Premium Works

The upfront premium is 1.75% of the base loan. The base loan is the loan before the premium is added. Most buyers finance it, which raises the balance and the interest paid over time.

The choice is all or nothing. You either pay the full upfront premium in cash or finance all of it. A split is not an option. Paying cash saves the interest on that added balance but uses cash you may need for repairs and reserves.

Here is the process side. The lender sends the upfront premium to HUD when the loan is endorsed, and HUD’s upfront premium guidance says a case cannot be endorsed if too little was sent. It is not a lender fee. The lender collects it and passes it along.

On your paperwork, the upfront premium shows on page 2 of the Loan Estimate in section B. The monthly premium shows on page 1 under Projected Payments, per CFPB’s guidance on mortgage insurance disclosures. That page is written for private mortgage insurance, but the form layout is the same. Read those two spots before you compare offers.

What Sets Your Annual Premium?

Four inputs decide it: the loan term, the base loan amount, the LTV at origination, and the type of transaction.

Credit score is not one of them. CFPB states that the premium costs the same regardless of credit score, with a slight increase for the smallest down payments. A buyer at 580 and a buyer at 740 on the same loan terms get the same premium. Your score still matters for approval and for other pricing. It just does not move the insurance line.

Loan size matters in a quiet way. HUD’s Mortgagee Letter 2023-05 ties a higher-priced tier to base loans above the conforming-limit line. County loan limits apply to FHA, so a buyer in a high-cost county can land in the higher bracket. Ask your loan officer which tier your base loan falls in.

HUD also lowered the annual premium in a recent cut. That is why older articles quoting a steeper figure read as outdated. They describe a schedule that no longer applies.

How Long Do You Pay?

Duration is set at origination, and it does not reset when your equity grows. This is where the decision lives for most first-time buyers.

This applies to a thirty-year loan. The 90% line is a down payment of 10%. A buyer who puts down the minimum is almost always in the life-of-loan group. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Many buyers expect the premium to drop off at 20% equity, like conventional PMI. FHA does not work that way. CFPB tells borrowers that FHA insurance follows different rules than PMI and to ask the servicer. The schedule keys to your starting LTV, not your current equity. Older loans from before a 2013-era rule change can follow different cancellation terms, but those do not apply to a new purchase.

Does the Premium Shrink as the Balance Falls?

The dollar amount drifts down slowly. The rate does not change.

Under HUD’s method, the annual premium is figured on the average outstanding balance for each year, following the original amortization schedule. HUD Handbook 4000.1 says the lender remits one-twelfth of the annual premium to HUD each month. The premium accrues from the start of amortization.

Early in a thirty-year loan the balance barely moves, so the premium dollars barely move either. The drop is real but gradual. Do not plan on it to relieve your budget in the first few years.

One more detail. The monthly premium sits inside the housing payment, so it counts in your qualifying ratios. The base pair on these programs is 31/43 (housing and total debt to income). Documented compensating factors can stretch that to 40/50 at the top tier. Most files run through automated underwriting, which decides which limits apply to you.

What It Costs You at Different Exit Points

Total cost depends on how long you hold the loan. Most owners do not keep an FHA loan to the end. They sell or refinance first.

Think of the cost in three buckets:

1. The upfront premium. It is sunk the day you close. If you financed it, you also pay interest on it for as long as you hold the loan.

2. The monthly premium. It accrues every month you hold the loan, up to the eleven-year mark or the full term.

3. The exit. Selling ends the premium. A refinance into a conventional loan ends it too, if that loan carries no mortgage insurance or carries a cheaper one.

Picture a buyer who puts down the minimum and sells in a handful of years. That buyer paid the upfront premium once and the monthly premium for those years. Nothing more is owed after the sale. Now picture a buyer in the same loan who keeps it for decades. The monthly premium runs the entire time. The gap between those two outcomes is the whole story of the cost “over time.”

CFPB suggests asking your loan officer to calculate total costs over several realistic timeframes. It is good advice. Ask for a comparison at a short hold, a medium hold and the full term.

Where the General Rule Breaks

The standard schedule has exceptions. These come up rarely for first-time buyers, but they are worth naming.

• Streamline and simple refinances of older FHA loans. Loans endorsed before mid-2009 get a special schedule rather than the standard one.
• Hawaiian Home Lands and Indian Lands. Section 247 loans carry no annual premium. Section 248 loans carry no upfront premium.
• FHA-to-FHA refinance. A declining share of the upfront premium can be credited when you refinance one FHA loan into another within a limited window. It is a credit, not cash back. The streamline also continues the premium, since you stay in the program.
• FHA to conventional. The program does not refund the upfront premium when you leave FHA entirely.
• Other FHA products. Reverse mortgages and multifamily loans use separate schedules. They do not apply to a home purchase.
• Occupancy. FHA is owner-occupant financing. These premiums do not apply to a second home or a rental.

Should You Stretch for a Bigger Down Payment?

It depends on what the extra cash would otherwise do.

A 10% down payment cuts the premium from life-of-loan to eleven years. That is a real saving. But the jump from 3.5% to 10% is a large amount of cash for most first-time buyers. If it drains your reserves, you can end up house-poor with no cushion for a roof or a water heater.

The annual rate itself changes only a little across the main LTV tiers. What changes is the duration. So the question is not “does more down lower my rate.” It is “do I want the premium to end at eleven years, and can I afford the cash to get there.”

A rough framework:

• If you plan to stay a long time and can reach 10% down while keeping reserves, the shorter premium window has value.
• If you may move or refinance in a few years, the duration matters less. Keeping cash may be the better call.
• If you are close to the 10% line, ask your loan officer to price both options side by side.

Many buyers plan to refinance out of FHA later. Whether that works depends on your equity, your credit and market conditions at that time. Nobody can promise it. Treat it as an option, not a plan.

Key Terms Defined

Upfront premium: a one-time charge of 1.75% of the base loan, paid in cash or financed.

Annual premium: a yearly insurance charge on the balance, collected monthly in the payment.

Base loan: the loan amount before any financed upfront premium is added.

LTV (loan-to-value): the loan amount divided by the home’s price or appraised value, whichever is lower.

Endorsement: the step where HUD accepts the loan for insurance and receives the upfront premium.

Loan Estimate: the form that shows your premiums and projected payment before closing.

Questions to Ask Your Loan Officer

Use these to verify your own number:

1. Which annual premium tier does my loan fall in, and why?

2. Does the premium last eleven years or the full term at my down payment?

3. What does the file look like if I finance the upfront premium versus paying cash?

4. Where do both premiums show on my Loan Estimate?

5. What is the total cost at a short hold, a medium hold and the full term?

6. How do my qualifying ratios change with the premium included?

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Upfront Premium Payments and Refunds

2. CFPB: What is private mortgage insurance?

3. CFPB: What is mortgage insurance and how does it work?

4. HUD Mortgagee Letter 2023-05

5. CFPB tells borrowers

6. HUD Handbook 4000.1 excerpt on monthly premium remittance