What is MIP on an FHA loan? FHA's own mortgage insurance, paid to HUD in two parts: 1.75 percent up front and an annual premium collected monthly, on every FHA loan whatever the down payment.
Mortgage insurance premium is what an FHA borrower pays for the insurance standing behind the loan. It is not private mortgage insurance and it does not go to a private insurer: FHA is the insurer, the premium goes to HUD, and it protects the lender against default rather than the borrower. Every FHA loan carries it whatever the down payment, which is the trade for FHA's lower credit and down payment thresholds.
It comes in two parts. The upfront premium is 1.75 percent of the base loan amount, due at closing and almost always financed into the loan. The annual premium is a percentage of the outstanding balance, divided by twelve and collected with the monthly payment; since HUD's 2023 reduction a 30-year loan with less than 5 percent down pays 0.55 percent and one with 10 percent or more down pays 0.50 percent (5 to 10 percent down is also 0.50 but for the full term), and the full table by loan size and loan-to-value is on hud.gov. On a $350,000 purchase with 3.5 percent down the base loan is $337,750, the upfront premium adds $5,911 to make the loan $343,661, and 0.55 percent of that is about $1,890 a year, roughly $158 a month.
How long it lasts is the part that catches people. With less than 10 percent down the annual premium runs for the life of the loan; with 10 percent or more it runs 11 years, and both are in HUD Handbook 4000.1. Private mortgage insurance behaves differently, because the Homeowners Protection Act gives a borrower the right to request cancellation at 80 percent of original value and requires automatic termination at 78 percent. None of that reaches an FHA loan, so hitting 20 percent equity does not end a life-of-loan premium. The exit is a refinance into a conventional loan, with its own closing costs and its own rate.
A worked example
A $350,000 FHA purchase with 3.5 percent down: $12,250 down, a base loan of $337,750, and an upfront premium of 1.75 percent, or $5,911, financed to make the loan $343,661. The annual premium at 0.55 percent is about $1,890 a year, roughly $158 a month on top of principal, interest, taxes and insurance. At 3.5 percent down it runs for the life of the loan.
How mortgage insurance comes off
Questions people ask
Can you cancel FHA mortgage insurance?
Not on a loan with less than 10 percent down, where the annual premium runs for the life of the loan. With 10 percent or more down it ends after 11 years. Otherwise the only exit is refinancing into a different loan, which is a new loan with new costs and a new rate.
Is MIP the same as PMI?
No. MIP is FHA's own insurance, paid to HUD on an FHA loan, with no cancellation right at 80 percent equity. PMI is private insurance on a conventional loan, and the Homeowners Protection Act gives the borrower a right to request cancellation at 80 percent of original value and requires automatic termination at 78 percent.