How Much FHA Mortgage Insurance Costs on a 2-4 Unit Home

The Quick Read: The premium depends on your loan term, loan size and down payment. It does not depend on how many units the building has. You pay an upfront premium of 1.75% of the base loan, usually financed into the loan. You also pay an annual premium, billed monthly, between 0.15% and 0.75% of the balance. A duplex, triplex or fourplex can still cost more in dollars because the loan is bigger.

What Is FHA Mortgage Insurance, and Who Does It Protect?

It protects the lender, not you. If you stop paying and the home sells for less than you owe, the insurance covers part of the lender’s loss. That backing is why FHA lenders can accept a 3.5% minimum investment from a 580 decision score.

The CFPB explains that mortgage insurance protects the lender. It is typically required on FHA loans. Borrowers pay for it monthly, at closing, or both. FHA does both.

The trade is simple. You get a lower entry price and more flexible credit standards. In return, you pay for the insurance. For a two-to-four-unit home, you also get to live in one unit and let the others help cover the payment.

Occupancy is the gate. In the wholesale programs Lendmire places FHA files with, this is an owner-occupied principal residence, one to four units. You live in one unit. The other units can be rented. Maximum financing is 96.5% LTV, and a non-occupant co-borrower is allowed. A buyer who does not plan to live in the building is in a different loan category altogether, because occupancy decides the leverage.

If you want the program overview first, Lendmire’s FHA loan programs page covers the basics. Here, the focus is the insurance.

The Two Premiums: Upfront and Annual

FHA mortgage insurance has two parts. The upfront premium is charged once. The annual premium is charged for years, collected in monthly installments.

• Upfront premium = base loan × 1.75%.
• Annual premium = outstanding balance × the annual rate for your tier, divided into monthly installments.

The base loan is the amount before the upfront premium is added. HUD’s Mortgagee Letter 2023-05 sets the upfront figure at 1.75% for forward mortgages. It carves out a few narrow exceptions, such as certain Streamline and Simple Refinances of FHA loans endorsed on or before May 31, 2009, and loans on Hawaiian Home Lands and Indian Lands. A typical 2-4 unit purchase is not in those carve-outs.

When the upfront premium is financed, it gets added to the loan. That has a small ripple. Interest and the annual premium then apply to a slightly larger balance. The ripple is real but modest, and it is the price of keeping the premium out of your cash at closing.

You will see both figures on your Loan Estimate. Read the lines for mortgage insurance there instead of trusting a number from a web page.

Does the Number of Units Change the Cost?

No. The rate does not rise because the building is a fourplex. The premium schedule in HUD’s letter is built on term, base loan amount and LTV. Same schedule, one-unit or four.

Units matter indirectly, in three ways:

1. Bigger loan. More units usually means a higher price. A higher price means a larger base loan, so 1.75% of it is a larger number. The annual premium also applies to a larger balance.

2. Higher tier. The annual rate depends partly on base loan amount. Above a set base-loan threshold, the annual rate steps up. Multi-unit loans are more likely to cross it. Treat the threshold as a line your lender will check against HUD’s current letter, because it is HUD’s to adjust.

3. Extra tests. Triplexes and fourplexes must pass a rent test, covered below. The maximum loan size also scales with unit count.

A common mix-up is thinking “multi-unit FHA has higher mortgage insurance rates.” The rate is set by the three inputs above. The dollars grow with the loan. Those are different things.

How the Annual Premium Is Set (Step by Step)

The annual premium comes from three inputs checked in order.

1. Term. Fifteen years or less sits in a lower-rate group. Longer than fifteen years sits in a higher one. Shorter terms carry the lowest annual rates in the range. The monthly payment on a shorter term is higher, so the savings come with a tradeoff.

2. Base loan amount. Is it above or below the threshold? Larger loans fall in higher rows.

3. LTV. This is the biggest lever you control. More down payment means lower LTV.

The wholesale programs Lendmire works with fit this range. The annual premium falls between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. The low end belongs to short terms with lower LTVs. The high end belongs to long terms, bigger loans and thinner down payments.

The annual premium is calculated on the outstanding balance. As you pay the loan down, the dollar amount of the premium shrinks a little each year. The rate stays the same. The dollars drift down with the balance.

How Long You Pay It

Duration is the part many buyers miss. On a thirty-year loan above 90% LTV, the annual premium lasts for the mortgage term. At or below 90% LTV, it ends after eleven years. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

The cutoff is set by your LTV at the start. Later equity does not change it. Hitting 20% equity through payments or price growth does not cancel FHA annual premiums by itself. That is different from conventional private mortgage insurance, which can usually be removed on request once equity builds. The same HUD letter has the duration table.

Picture two buyers purchasing the same fourplex. One puts down the 3.5% minimum, so the loan starts at 96.5% LTV. The other puts down 10%, so the loan starts at 90%. The first buyer pays the annual premium for the whole term. The second stops after eleven years. That alone can change the lifetime cost by a wide margin. The second buyer needs far more cash up front, so it is a real tradeoff. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

If you plan to keep the loan for the long run, the duration matters as much as the rate. If you expect to sell or refinance within a few years, the upfront cash matters more.

Where Mortgage Insurance Meets the Rent Test

Triplexes and fourplexes carry one more step. The property has to support its own payment.

HUD’s reference guide on rental income says the net rental income on a three-or-four-unit property must meet or exceed the projected mortgage payment. The appraiser estimates fair market rent for all the units, including yours. A vacancy allowance comes off the top. What remains is tested against the payment. Duplexes are generally not put through this test, but check the specifics with your loan officer.

Here is the link to mortgage insurance. The monthly premium is part of the monthly housing cost. A higher premium tier makes the payment bigger, which can tighten the test. This is the logic of the file, and your loan officer should confirm exactly how the test is run on your loan.

That connection is easy to overlook. People shop the rent and the price. Then the insurance tier moves the payment just enough to matter. Two things can help. A larger down payment lowers LTV, which can lower the rate. A different property price or a shorter loan term can change the mix.

The test also uses the appraiser’s rent number, not the number a seller quotes or a listing promises. Expect the appraisal to carry real weight on a three- or four-unit file.

Other Rules That Shape the Total Cost

A few program facts sit next to the insurance and affect your total.

• Ratios. The base pair is 31/43. That means housing costs are about 31% of income, and total debts about 43%. With documented compensating factors, ratios can reach 40/50 at the top tier. Most files are run through an automated finding, which governs the call. Insurance is part of the housing cost, so it feeds directly into that first ratio.
• Seller help. Seller or interested-party contributions can go up to 6% of the price. That can offset closing costs, though it does not erase the premium.
• Loan limits. County loan limits apply. They are set by county, rise with unit count, and change every year. HUD publishes a county limit lookup tool. A fourplex in a high-cost county can be financed for far more than one in a low-cost county.
• Mixed-use buildings. Some mixed-use properties with one to four units are eligible when most of the floor area is residential. Ask early if yours has a storefront.
• Credit events. HUD’s waiting periods apply. That is two years from a chapter 7 discharge and three years from a foreclosure. These are HUD rules, not a promise from any lender.

A Practical Look at the Decision

Say you are comparing three versions of the same purchase. The price stays fixed. Only the down payment and term change.

Version one: minimum down. You put down 3.5%. The loan sits at 96.5% LTV, and the upfront premium is financed on top. The annual premium is in the highest-LTV tier and lasts for the term. You keep the most cash in your pocket. You pay the most over time. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

Version two: 10% down. LTV lands at 90%. The annual premium ends after eleven years. The monthly premium is lower from day one. You need more cash to start. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.

Version three: shorter term. You choose a fifteen-year loan. Annual rates are lower in the range. The monthly payment is higher, which matters on a triplex or fourplex where the rent test is run against the payment.

None of these is the right answer by default. The choice depends on your cash, your plans for the building, and how the rent test looks. This is where a loan officer earns the job. Lendmire arranges FHA files through wholesale lenders, and the useful work is running the versions side by side before you pick one. Ask for a Loan Estimate for each. The real figures for your file, which is better than any generic table.

Can You Get Out of It Later?

You can refinance, and that is the only real exit on most FHA loans with long-lasting premiums.

• FHA Streamline. It refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. The mortgage insurance continues. It is a way to change terms, not to drop the insurance.
• FHA rate-and-term. With an appraisal, it reaches 97.75% on a principal residence you have occupied for the previous twelve months.
• FHA cash-out. It reaches 80% LTV on a home owned and occupied for twelve months before the case number. For a comparison against another structure, see Lendmire’s piece How Much FHA Cash-Out Costs vs Conventional on a 2-4 Unit Primary Home.
• Conventional refinance. Moving to a conventional loan can end FHA mortgage insurance if your equity and credit support it. Conventional loans may carry their own private mortgage insurance, so compare the whole picture. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Refinancing has its own costs. It resets terms. It is a decision to model, not an automatic fix.

Older loans can follow different cancellation rules. If your FHA loan predates the 2013 changes, ask your servicer which rules apply to you.

Key Terms Defined

Base loan amount: The loan before the upfront premium is added. Both the upfront premium and the annual-premium tier start here.

Upfront mortgage insurance premium (UFMIP): A one-time charge of 1.75% of the base loan. It is usually financed into the loan.

Annual mortgage insurance premium (MIP): A yearly charge as a percentage of the balance, billed in monthly installments.

LTV (loan-to-value): The loan balance as a percentage of the home’s value. A 3.5% down payment means 96.5% LTV. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Self-sufficiency test: The rent test for three- and four-unit FHA purchases. Net rental income must cover the projected payment.

Compensating factors: Strengths in your file, like savings or steady income, that can support higher debt ratios.

Common Mistakes to Avoid

• Shopping on rate alone. The duration of the insurance can matter more than the annual percentage. Compare lifetime cost, not just the monthly line.
• Ignoring the threshold. A slightly higher price can push the loan into a higher tier. Ask your loan officer where the line sits today.
• Trusting old pages. The annual schedule was lowered once, and some older pages still show the pre-change figures. Use your Loan Estimate and HUD’s current letters.
• Forgetting the rent test. On a triplex or fourplex, a strong price can still fail on appraised rent.
• Assuming equity cancels it. On most current FHA loans, it does not.

Next Steps

Start with three questions. How much cash can you bring? How long will you keep the loan? Does the building have three or four units? Your answers shape the tier, the duration and the rent test.

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

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

2. HUD Mortgagee Letter 2023-05

3. HUD Archives: HOC Reference Guide, Rental Income p. 2-10

4. HUD FHA loan limit lookup tool