FHA home loans explained for first-time buyers
Chapter 2: the price of flexibility
The friendly answer
FHA loans carry two premiums. The upfront mortgage insurance premium is a one-time charge, usually added to the loan amount. The annual premium is divided into twelve and added to each monthly payment. HUD sets both, and how long the annual premium lasts depends on your loan's terms. Your Loan Estimate lists both.
Last reviewed against the primary sources listed below.
Two premiums
| Upfront MIP | Annual MIP | |
|---|---|---|
| When paid | At closing, or financed | Monthly, in the payment |
| Set by | HUD | HUD |
| Where to see it | Loan Estimate, page two | Loan Estimate, page one |
How it differs from PMI
Private mortgage insurance on conventional loans can be cancelled under federal rules once you build enough equity. FHA's annual premium follows HUD's rules instead; many owners who want it gone refinance into a conventional loan later. See CFPB on mortgage insurance.
Seeing it in dollars
The MIP explainer on this site turns the rates on your own Loan Estimate into dollar amounts.
First-time buyers often ask
What is FHA MIP?
Mortgage insurance premiums that protect the lender on an FHA loan: a one-time upfront premium and an annual premium paid monthly.
Can you remove FHA mortgage insurance?
It depends on the loan's terms under HUD rules. Many owners remove it by refinancing to a conventional loan once they have enough equity.