FHA Mortgage Insurance Premium Requirements for Primary Home Buyers

The Quick Read: Every FHA purchase loan carries two premiums: an upfront premium of 1.75% of the base loan, usually financed, and an annual premium billed monthly with the mortgage payment. The annual premium falls between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV it lasts for the full term, and at or below 90% it ends after eleven years. All figures are subject to lender guidelines and full file review.

What Is the FHA Mortgage Insurance Premium?

The premium is insurance that protects the lender, not you. If a borrower defaults, FHA reimburses the lender for part of the loss. Because FHA accepts thin down payments, it charges every borrower for that protection. You will also see it called MIP, with the upfront piece called UFMIP. Some people say “FHA PMI,” which is a common shortcut but technically wrong.

Congress sets the maximum premiums in statute, and HUD may set them lower. A Congressional Research Service overview describes the structure: an upfront premium plus annual premiums, both set as a percentage of the loan amount. HUD lowered the annual rates in a 2023 change and left the upfront premium where it was. HUD Mortgagee Letter 2023-05 revised the annual premium schedule for forward mortgages, and it states the upfront premium for all mortgages at 1.75% of the base loan amount.

Two things follow from that. The premium is not negotiable with a lender, and it is not a fee a broker or lender keeps. It goes to FHA.

Does Every FHA Primary Home Purchase Require It?

Yes. Across the wholesale programs Lendmire places FHA files with, every purchase carries both premiums. A bigger down payment or a stronger credit score does not waive them. It can change the annual premium’s size and duration, but not whether you pay.

Here is the primary-home context. The FHA purchase programs we arrange are for owner-occupied principal residences, one to four units. A non-occupant co-borrower is allowed. The financing envelope is up to 96.5% LTV with a 3.5% minimum investment from a decision score of 580 or higher. Because the loan is high-leverage by design, mortgage insurance is built in from day one. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

A few narrow exceptions exist in HUD’s rules. Mortgages on Hawaiian Home Lands (Section 247) do not require annual premiums, and mortgages on Indian Lands (Section 248) do not require the upfront premium. Most buyers will never touch either.

How Is the Upfront Premium Calculated and Paid?

The upfront premium is 1.75% of the base loan amount. The base loan is the amount before the premium is added. Multiply the base loan by 0.0175 and you have it.

You have two choices: pay it entirely in cash at closing, or finance it entirely into the loan. You cannot split it. Most borrowers finance it, which keeps cash to close lower. The tradeoff is real. Financing raises your balance, so you pay interest on the premium for as long as you hold the loan.

One detail helps buyers. FHA does not count a financed upfront premium when it tests your LTV or the county loan limit. County loan limits apply and change every year. HUD Handbook 4000.1 is the governing handbook if you want the source text.

Here is a practical way to think about it, in percentages only. On a purchase at maximum financing, the financed premium adds a bit under two percent to the balance you carry. That addition is why your final loan amount on the Closing Disclosure is higher than the base loan you were quoted.

How Does the Annual Premium Work?

The annual premium is a percentage of your loan balance, divided by twelve and collected monthly with your payment. Within the programs we work with, it runs between 0.15% and 0.75% of the balance. Where you land depends on three things.

1. Loan term. Shorter terms carry their own, lower schedule. Fifteen years or less sits in a separate grid from thirty years.

2. Loan amount. Higher base loan amounts carry higher rates. HUD’s grid has breakpoints by amount.

3. Original LTV. More down payment lands you in a lower band.

HUD’s schedule is a grid, with rows for loan amount and columns for LTV. Each cell shows a rate and a duration. The exact cell for your loan depends on your numbers and your case number date, so rely on the Loan Estimate for your file instead of a quoted average.

How Long Does the Annual Premium Last?

It lasts for the loan term when you start above 90% LTV, and for eleven years when you start at 90% LTV or below. That is the rule on a thirty-year loan, and it comes from HUD’s schedule, which Mortgagee Letter 2023-05 updated. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.

The key word is original. The duration is fixed at origination from your original LTV and term. It is not an equity test. Your home can appreciate and you can pay down principal, and on a newer loan that generally will not end the premium early. Typical exits are a payoff, a sale, or a refinance into a different loan.

That is why the down payment decision matters. Putting 10% down instead of 3.5% moves you across the 90% line, and the premium changes from a lifetime cost to an eleven-year cost. For a buyer who plans to stay a long time, that threshold may be the single biggest lever in the whole loan. For a buyer who expects to sell or refinance within a few years, it matters less. The flip point is your holding period.

Older FHA loans, those with case numbers before mid-2013, can follow different cancellation rules. If you hold one, check your loan documents and ask your servicer.

How Does the Premium Affect Qualifying?

The monthly premium is part of your housing payment, and the lender counts that payment against your income. So the premium is a qualifying issue, not just a cost line.

The base ratio pair on the programs we place is 31/43: housing payment to income, and total debts to income. With documented compensating factors, ratios can reach 40/50 at the top tier. Many files are decided by the automated underwriting finding rather than a fixed ratio. All of it is subject to lender guidelines and full file review.

In practice, a buyer close to the ratio limit feels the premium twice. It raises the payment, and the higher payment squeezes the ratio. If a file is borderline, a lender may look at a longer term, a lower price, or reducing other debt. Those are choices to weigh with the file in front of you.

MIP Versus Conventional PMI

FHA premiums are set by HUD and fixed by the grid at origination. Conventional private mortgage insurance is priced by private insurers and ends under a different set of rules.

For conventional loans, the CFPB’s Homeowners Protection Act examination manual explains that a servicer must end PMI at the midpoint of the amortization period if the borrower is current and it was not already cancelled. That manual covers conventional PMI only. It does not describe FHA premiums.

So which is better? It depends. For a buyer with a lower credit score and a small down payment, FHA often fits better because it is built for that profile. For a buyer with strong credit and 5% or more down, conventional can end its insurance sooner, which may cost less over a long hold. Compare both on your own file before choosing.

Where the General Rule Breaks

Several named situations change the premium.

• Streamline refinances of older FHA loans. For a Streamline or Simple Refinance of an FHA loan endorsed on or before May 31, 2009, HUD sets a much smaller upfront premium and a 55 basis point annual premium. The FDIC’s streamline summary references that annual figure. Most borrowers do not have a loan that old.
• Other streamlines. On the wholesale programs we place, an FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. The premium continues.
• Refinancing within a short window. The upfront premium is generally not refundable, except as a credit toward the new upfront premium when you refinance FHA to FHA within a limited period. It is a credit, not cash back, and it shrinks as time passes. Ask your loan officer to confirm the schedule for your loan.
• Sections 247 and 248. Covered above. Rare, and tied to specific lands.
• Appraisal surprises. The appraised value sets LTV. If a low appraisal or a price change pushes you across the 90% line, your duration changes with it.

For the upfront piece, see its explainer FHA Upfront Mortgage Insurance Premium Financing and Refund Rules. For multi-unit buyers, its article How Much FHA Mortgage Insurance Costs on a 2-4 Unit Home covers that case.

Practitioner Note: What Buyers Miss

In FHA files we arrange, the premium rarely surprises borrowers at the upfront stage. It surprises them at the monthly stage, and again when they ask when it ends. Buyers expect it to drop away at 20% equity, as conventional insurance can. On a newer FHA loan above 90% LTV, it does not. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

The fix is simple: ask for the premium’s duration, in writing, before you lock in a down payment. Then decide with the holding period in mind.

Key Terms Defined

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

UFMIP: The one-time upfront mortgage insurance premium, 1.75% of the base loan.

Annual MIP: The yearly premium, a percentage of the balance, billed in monthly installments.

Original LTV: The loan-to-value ratio at origination, which fixes how long the annual premium lasts.

Net tangible benefit: A measurable improvement a borrower must receive from an FHA Streamline refinance.

How to Check Your Own Premium

Look at your Loan Estimate first. It shows the monthly mortgage insurance in the projected payment, and the upfront premium in the closing cost detail if you paid it in cash. Your Closing Disclosure then confirms the final figures. The case number date matters, since HUD’s schedule changes by effective date. For the schedule itself, go to the HUD sources linked here, and ask your loan officer which row of the grid applies to you.

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.

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

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Congressional Research Service: FHA-Insured Home Loans Overview

2. HUD Mortgagee Letter 2023-05

3. CFPB Homeowners Protection Act examination procedures

4. FDIC FHA Streamline Refinance summary