The Quick Read: Two premiums apply. The upfront premium is 1.75% of the base loan, and it is the same on every term. The annual premium comes from a term-specific schedule, set by your loan amount and your original loan-to-value ratio (LTV). That same LTV also decides how long you pay it. On a 15-year loan, the 90% LTV line is the one to watch. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Key Takeaways
- The upfront premium is 1.75% of the base loan, whether the term is 15 or 30 years.
- The annual premium runs between 0.15% and 0.75% of the balance across the program. Term, loan amount and LTV pick the spot.
- Credit score does not change the premium. It changes whether you qualify, not what the insurance costs.
- On a 15-year loan, 90% LTV or less means the annual premium ends after eleven years. Above 90%, it lasts the full term.
- A 15-year term lowers the premium percentage. It does not make the loan cheap, because the principal-and-interest payment climbs. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
What Are the Two Premiums, Exactly?
FHA mortgage insurance has two parts, and they work differently. One is a single charge at the start. The other is a monthly cost that rides along with your payment.
FHA payment estimate
Starting assumptions reflect an example price and the FHA minimum investment. Replace them with your own figures.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA loan quote.
Illustrative starting assumptions: a $350,000 price, the FHA minimum investment as the down payment, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not an FHA loan quote; your rate is set by the lender at lock. FHA mortgage insurance follows HUD’s published schedule for the term, leverage and loan size entered; taxes, insurance and dues are editable estimates; closing costs are not included; county loan limits are not checked here. Licensed in sixteen states for consumer mortgages. Lendmire is not affiliated with or acting on behalf of FHA, HUD, or the federal government.
The upfront premium is 1.75% of the base loan amount. Most buyers finance it into the loan instead of paying cash at closing. The annual premium is a percentage of your balance, collected in monthly installments. Both go to the FHA insurance fund, not to your lender.
That is worth saying plainly: the insurance protects the lender and the fund if a borrower defaults. It does not protect you. It is also not private mortgage insurance, which belongs to conventional loans and follows different rules. Across the wholesale programs Lendmire places FHA files with, borrowers confuse the two constantly. They then assume FHA insurance will drop off at 20% equity. It usually will not.
If you want the full program picture before the mechanics, Lendmire’s FHA loan programs page covers leverage, credit floors and ratios in one place.
How Is the Annual Premium Sized, Step by Step?
The annual premium is sized in a fixed order. Each step feeds the next, and a change early in the chain moves everything after it.
Step 1: Find the base loan amount. This is the loan before the financed upfront premium is added. Say you buy with the maximum financing of 96.5% of the price. The base loan is that 96.5%. The financed upfront premium sits on top and is not part of the base.
Step 2: Set the original LTV. Divide the base loan by the lesser of the sales price or the appraised value. The financed upfront premium is left out of this math. Because the appraisal can lower the value, it can also push you over a line you thought you cleared.
Step 3: Place the loan amount. HUD splits loans at a base-loan threshold it sets. Loans above it are treated more strictly than loans below it. County loan limits also apply to FHA loans, and those change every year. This article does not quote a dollar line for either one. Your loan officer will confirm where your base loan lands.
Step 4: Use the right term table. The schedule has one table for terms longer than 15 years and another for terms of 15 years or less. A 15-year loan uses the second table. Its percentages sit at the low end of the program’s 0.15% to 0.75% span.
Step 5: Read off the premium percentage and duration. Term, loan size and LTV band together give you both numbers.
Step 6: Convert to a monthly installment. The annual percentage is spread over twelve months. On many loans, the premium is recalculated against the declining balance, so the installment can step down as you pay the loan off. A 15-year loan amortizes faster, so its balance falls faster.
Step 7: Add it to the payment. The monthly premium is part of your housing payment. It also counts in the housing ratio a lender tests. The base ratio pair is 31/43, housing over total debt. Documented compensating factors can stretch that toward 40/50 at the top tier, and the automated underwriting finding governs most files.
HUD’s Mortgagee Letter 2023-05 is the document that sets the upfront premium on the base loan and the effective date of the current annual schedule.
What Does the 15-Year Table Look Like?
The 15-year table has a simple shape. The percentage changes with loan size and LTV band, and the duration changes with LTV alone. Here is the structure, without the percentages you should confirm against the schedule itself.
| Loan size | Original LTV | Premium level | How long it lasts |
|---|---|---|---|
| At or below HUD’s threshold | 90% or less | Lowest tier | 11 years |
| At or below HUD’s threshold | Above 90% | Middle tier | Full loan term |
| Above HUD’s threshold | 78% or less | Lowest tier | 11 years |
| Above HUD’s threshold | Above 78% through 90% | Middle tier | 11 years |
| Above HUD’s threshold | Above 90% | Highest tier | Full loan term |
Two things stand out. First, the 78% line only moves the premium level on larger loans. It never changes the duration. Second, the real dividing line for duration is 90% LTV. HUD’s FHA Connection lookup states that for terms of 15 years or less, the premium runs 11 years at 90% LTV or below, and it runs for the full loan term above 90%. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
On a 15-year loan, “11 years” is most of the schedule. You do not get a long insurance-free stretch. You get about four years of relief at the end. That is a real benefit, but it is smaller than the same eleven years looks on a 30-year loan.
A Full Worked Example
Run the numbers on a purchase with minimal cash down. You put 3.5% down, the minimum investment at a decision score of 580 or higher. The base loan is 96.5% of the price. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The upfront premium is 1.75% of that base loan. That works out to roughly 1.7% of the purchase price. Financed, it lifts your total loan to about 98.2% of the price. Your LTV for insurance purposes is still 96.5%, because the financed premium is excluded.
At 96.5%, you are above 90%. On a 15-year term, that means the annual premium lasts the full 15 years. The premium percentage lands in a higher tier than a borrower with more equity would see.
Now change one input. Say you put 10% down instead. Your base loan is 90% of the price, and your original LTV is exactly 90%. You sit on the favorable side of the line. The annual premium ends after eleven years, and the percentage drops a tier. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Notice what moved the outcome. Not your credit score. Not your income. Just the down payment, which moved the LTV across one line. That is why a small change in down payment or appraised value matters more here than most borrowers expect.
How Long Do You Pay on a 15-Year Schedule?
Duration depends on LTV, and the clock starts at the beginning of the loan. At 90% LTV or below, the annual premium stops after eleven years. Above 90%, you pay it until the loan is paid off or refinanced. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Here is the comparison borrowers actually care about.
| Original LTV on a 15-year loan | Annual premium ends |
|---|---|
| 90% or less | After 11 years |
| Above 90% | At the end of the term |
Two rules sit behind that table. Cancellation uses your original value, not a new appraisal. If your home appreciates, HUD does not retest it. Cancellation also follows the initial amortization schedule, not extra principal you pay. Paying down early shortens the loan, but it does not move the eleven-year mark.
15-Year vs. 30-Year: What Changes and What Doesn’t
A shorter term helps the insurance and hurts the payment. Both facts are true, and most borrowers hear only one of them.
| Item | 15-year loan | 30-year loan |
|---|---|---|
| Upfront premium | 1.75% of base loan | 1.75% of base loan |
| Annual premium level | Lower tiers | Higher tiers |
| Duration at 90% LTV or less | 11 years | 11 years |
| Duration above 90% LTV | Full term (15 years) | Full term (30 years) |
| Principal-and-interest payment | Higher | Lower |
| Credit score effect on premium | None | None |
The upfront premium does not care about your term. Financing it raises your balance either way. The CFPB notes that rolling the upfront premium into the loan increases the loan amount and the overall cost.
The 11-year duration is also the same number on both terms. On a 30-year loan, it is a minority of the schedule. On a 15-year loan, it is most of it.
Now the honest tradeoff. A lower premium percentage trims the monthly insurance line. But a 15-year schedule pushes principal and interest up sharply, and the monthly premium counts in your housing ratio. The insurance savings offset some of the higher payment. They do not erase it. This one is a genuine toss-up for many buyers. A 15-year loan builds equity fast and carries a lighter insurance tier. A 30-year loan keeps the monthly obligation easier to qualify for. The right answer depends on how much room your ratios have.
Where the General Rule Breaks
The table above covers most files. These are the edge cases where it does not.
The loan-size threshold. HUD sets a base-loan line that splits the lower and higher tiers. Published figures for that line differ from one source to another, and HUD adjusts it over time. Treat any dollar figure you read in a blog as unconfirmed until your loan officer checks it against the current HUD schedule.
Older loans. Loans from before HUD’s duration overhaul follow different cancellation rules. Some of those loans cancel automatically at 78% LTV. HUD’s FHA Answers page lays out the pre-change cases. If you hold an older FHA loan, do not assume today’s eleven-year rule describes it. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The old 15-year exemption. A 15-year loan at 78% LTV or less used to skip the annual premium entirely. That exemption was removed. Anyone quoting it today is quoting an older rulebook. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Appreciation. A rising home value does not cancel the premium. HUD tests cancellation against the original value, not a fresh appraisal.
Program exceptions. Some narrow loan types are treated differently. Hawaiian Home Lands loans carry no annual premium, and Indian Lands loans carry no upfront premium. Both exceptions appear in the same Mortgagee Letter. Most buyers will never touch either one.
Refinancing. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. The premium continues on the new loan. When you refinance a recent FHA loan into another FHA loan, a partial refund credit on the old upfront premium may apply. It is a credit toward the new premium, not cash, and it shrinks as time passes. Ask your loan officer to confirm whether it applies to your timing.
Occupancy. FHA is for a principal residence you will occupy, one to four units. That is the only lane this schedule covers.
What a Practitioner Watches on a Real File
Premium sizing is rarely the reason an FHA file goes sideways. The surprise usually comes from LTV drift. A buyer plans a down payment, the appraisal lands a little under the contract price, and the lender uses the lower value. A loan that was sitting just under 90% suddenly sits just over it.
On a 15-year term, crossing that line costs you twice. The premium moves up a tier, and the duration jumps from eleven years to the full term. A buyer within a point or two of 90% should ask early whether a slightly larger down payment, or seller contributions that stay within the 6% limit, change the picture. Ask before the appraisal, not after.
The second pattern is ratio pressure. A 15-year payment plus monthly premium can strain the 31/43 base pair on a file with thin margins. Documented compensating factors can help, but they are reviewed on the full file. Strong reserves and steady employment tend to matter most. None of this is promised in advance. Every parameter here is subject to lender guidelines and full file review.
Key Terms Defined
Base loan amount: the loan before the financed upfront premium is added. Both premiums are figured from it.
Upfront premium: a one-time charge of 1.75% of the base loan, usually financed into the balance.
Annual premium: the ongoing mortgage insurance cost, a percentage of your balance collected in monthly installments.
Original LTV: the base loan divided by the lesser of price or appraised value, measured when the loan starts.
Duration: how many years the annual premium is collected, set by term and original LTV.
Amortization: the schedule by which your balance shrinks as you make payments.
Decision Block: What This Means for You
Use this as a practical checklist when you compare a 15-year FHA loan with other options.
- Check your LTV band first. Know whether you land at 90% or below, or above it. This one number changes the percentage and the duration.
- Plan the down payment around the line. If you are close to 90%, a modest change can shift the outcome.
- Test the payment, not just the premium. The shorter term raises principal and interest. Confirm that the housing ratio still fits.
- Ignore credit-score myths here. Your score matters for qualifying. It does not change the premium. The CFPB says FHA mortgage insurance costs the same regardless of credit score.
- Read the Loan Estimate. The monthly premium shows up there and again on the Closing Disclosure. Compare them line by line.
- Ask about old assumptions. If someone tells you the premium falls off at 78%, ask which rulebook they mean.
If you are working through whether to shorten the term at all, Lendmire’s piece Does a 15-Year FHA Loan Mean Lower Mortgage Insurance? walks through the same tradeoff from the payment side. And if you are weighing a switch later, there is a separate piece Can an FHA Borrower Refinance Out of Mortgage Insurance in Year One?.
Frequently Asked Questions
Does my credit score change the mortgage insurance on a 15-year FHA loan?
No. The CFPB states that FHA mortgage insurance costs the same regardless of credit score. Your score still matters for qualifying. The wholesale programs Lendmire works with start at a decision score of 580 for the 3.5% minimum investment. But once you qualify, term, loan size and LTV set the premium.
Can I avoid the upfront premium?
Not on a standard FHA purchase loan. The 1.75% charge applies to the base loan on all terms. You can pay it at closing or finance it. Financing raises your balance, which is why many borrowers weigh the cash-versus-financed choice with care. Narrow program exceptions exist, but they apply to specific loan types, not ordinary purchases.
Does the premium drop at 78% LTV?
Not on current loans. For newer loans, HUD uses fixed durations instead: eleven years at 90% LTV or below on a 15-year term, and the full term above 90%. The 78% line now only affects the premium tier on larger loans. It still governs cancellation on some older loans, so the answer depends on when your loan was originated. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
If my home value rises, can I drop the premium early?
No. HUD does not use new appraised values to test for cancellation. It uses the original value and the initial amortization schedule. Extra principal payments do not move the cancellation date either. A refinance is the usual way out, and that is a separate decision with its own costs.
Is a 15-year FHA loan the cheaper choice overall?
It depends on your file. The premium percentage is lower, and you build equity faster. But the monthly principal and interest is higher, and the monthly premium counts toward your housing ratio. For borrowers with room in their ratios, the shorter term can make sense. For borrowers near the limit, it may not.
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
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2023-05
2. HUD FHA Connection MIP lookup
3. CFPB
4. HUD FHA Answers: MIP cancellation for older case numbers
This article is part of Lendmire’s FHA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How an FHA Cash-Out Refinance Counts Mortgage Insurance · Can You Refinance an FHA Loan to Get Rid of Mortgage Insurance? · FHA Loan Mortgage Insurance Requirements for Avoiding Premium
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.