What an FHA Loan Actually Is
An FHA loan is a regular mortgage from a regular lender that happens to be insured by the Federal Housing Administration. The government is not lending you the money — it is promising the lender it will cover their losses if you default. That guarantee is what lets lenders accept a 3.5% down payment and credit scores far below what conventional lending requires.
You pay for that guarantee, and the price is the mortgage insurance premium. Understanding MIP is really the whole point of running an FHA calculation, because it is what separates the appealing headline terms from the actual long-run cost.
How This Calculator Works
The annual MIP rate is not a single number — HUD sets it by loan term, loan size and loan-to-value. The calculator selects the right tier automatically and tells you which one it applied, and you can override it if your lender quoted something different. Note that the upfront MIP is calculated on the base loan and then added to what you borrow, so financing it means paying interest on the premium for the entire term.
MIP: The Part That Catches People Out
FHA mortgage insurance has two components and both are mandatory on every FHA loan regardless of down payment. The upfront premium is 1.75% of the base loan, due at closing, and almost everyone rolls it into the mortgage. The annual premium is charged monthly and typically runs between 0.15% and 0.75% depending on your term and LTV — 0.55% is the common figure for a 30-year loan with the minimum down payment.
Here is the rule that matters more than any other number on this page. If you put down less than 10%, the annual MIP stays for the entire life of the loan. There is no equity threshold that removes it, no point at which it cancels automatically. Put down 10% or more and it comes off after 11 years.
That single distinction is worth tens of thousands of dollars over a 30-year term, and it is why the calculator shows total MIP paid rather than just the monthly figure. Most FHA borrowers put down 3.5%, which means they are in the life-of-loan category and their real exit is refinancing rather than waiting.
FHA vs. Conventional
The honest summary is that FHA is usually cheaper to enter and more expensive to keep.
FHA advantages: 3.5% down, credit scores from 580 (or 500 with 10% down), more forgiving treatment of past credit problems, and often more flexible debt-to-income allowances. For a buyer who cannot qualify conventionally, FHA is not the cheaper option — it is the only option, and that is a perfectly good reason to use it.
Conventional advantages: no upfront insurance premium, and PMI that cancels automatically once the balance reaches 78% of the original value. A conventional loan with 5% down needs more cash at closing than FHA with 3.5%, but the mortgage insurance has a defined end date rather than running forever.
The comparison tab prices both on your own numbers and totals them across the full term, which is where the difference usually shows up. Bear in mind the comparison assumes you qualify for both at the same rate — if your credit score means a materially worse conventional rate, or no conventional approval at all, that changes the picture entirely.
2026 FHA Loan Limits
FHA sets a maximum loan amount county by county. For 2026 the national floor for a single-family home is $541,287 and the ceiling in high-cost areas is $1,249,125. Most counties sit at or near the floor; expensive metropolitan areas run up to the ceiling.
If the loan you need exceeds your county's limit, FHA financing is simply unavailable for that purchase. Your options become a larger down payment to bring the loan under the cap, a less expensive property, or conventional financing. The Loan Limits tab converts a limit into the maximum home price it supports at both 3.5% and 10% down, which is usually the more useful way to look at it when house hunting. Limits are also higher for two, three and four unit properties, which is worth knowing if you are considering buying a duplex to live in.
Qualifying: Credit, DTI and Occupancy
The FHA's published credit floor is 500, with 3.5% down available from 580. In practice many lenders apply their own overlays and want 620 or more, so the official minimum and what you can actually get approved for are frequently different. If one FHA-approved lender declines you, another may not — the overlay is theirs, not the FHA's.
Debt-to-income limits are more flexible than conventional lending, commonly stretching past 43% and sometimes to around 50% with compensating factors such as strong reserves or a long stable employment history. The property itself must also pass an FHA appraisal covering minimum property standards, which can complicate purchases of homes needing significant repair.
Occupancy is non-negotiable: FHA loans are for primary residences only, with a requirement to move in within roughly 60 days and stay at least a year. The commonly used workaround is entirely legitimate — buying a two to four unit building, living in one unit and renting the others.
The Refinance Exit
For anyone putting less than 10% down, the plan is usually to refinance out of FHA eventually. Once you have around 20% equity through payments and appreciation, refinancing into a conventional loan removes mortgage insurance completely.
Whether that is worth doing depends on three things: how much MIP you are still paying, the rate available on the new loan, and closing costs on the refinance. Removing $180 a month of MIP saves $2,160 a year, which pays back $6,000 of closing costs in under three years — provided the new rate is not meaningfully worse than your current one. If rates have risen sharply since you bought, the maths can go the other way, and staying with the MIP may be cheaper than refinancing into a higher rate.
A Worked Example
Take a $400,000 home with 3.5% down at 6.5% over 30 years, with property tax at 1.1% and insurance at $1,800 a year.
Your down payment is $14,000, leaving a base loan of $386,000. The upfront MIP is 1.75% of that — $6,755 — which financed into the mortgage brings the total borrowed to $392,755. Principal and interest come to about $2,482 a month. Annual MIP at 0.55% on the base loan adds $177, property tax adds $367 and insurance $150, for a total around $3,176 a month.
Because the down payment is under 10%, that $177 never goes away — over 30 years it totals roughly $63,700. Increase the down payment to 10% and two things change at once: the rate tier drops to 0.50% and the MIP ends after 11 years, cutting total mortgage insurance to under $20,000. That is a difference of more than $43,000 from a single decision about the down payment, which no amount of rate shopping would recover.
Frequently Asked Questions
How much down payment does an FHA loan require?
3.5% of the purchase price if your credit score is 580 or above. Between 500 and 579 the requirement rises to 10%. That low barrier is the main reason FHA loans are so widely used by first-time buyers, though the down payment is only part of the cash you need — closing costs are due on top of it.
What is MIP and how is it different from PMI?
MIP is the FHA's mortgage insurance premium and it comes in two parts: an upfront premium of 1.75% of the loan, normally financed into the mortgage, and an annual premium charged monthly. Conventional PMI has no upfront component and cancels automatically once you reach 20% equity. FHA MIP is charged on every FHA loan regardless of down payment, and getting rid of it is much harder.
Does FHA mortgage insurance ever go away?
It depends entirely on your down payment. Put less than 10% down and the annual MIP stays for the full life of the loan — there is no equity threshold that removes it. Put 10% or more down and it drops off after 11 years. For most FHA borrowers, who put down 3.5%, the only practical way out is refinancing into a conventional loan once they have enough equity.
Is an FHA loan cheaper than a conventional loan?
Usually cheaper to get into and often more expensive to keep. FHA needs less cash up front and accepts weaker credit, but the upfront MIP is added to your balance and the annual MIP typically never cancels. A conventional loan with 5% down costs more at closing but its PMI disappears at 20% equity. The comparison tab prices both on your own numbers rather than relying on the general rule.
What are the FHA loan limits for 2026?
FHA limits are set by county and run from a national floor of $541,287 to a ceiling of $1,249,125 for a single-family home in 2026. Most of the country sits at or near the floor, while high-cost metropolitan areas reach the ceiling. If the loan you need exceeds your county's limit, an FHA loan is not available for that purchase and you would be looking at a conventional or jumbo loan instead.
What credit score do I need for an FHA loan?
The FHA's own floor is 500, with 3.5% down available from 580. In practice many lenders apply their own stricter overlay and want to see 620 or higher, so the published minimum and what an individual lender will actually approve are often different numbers. It is worth applying with more than one FHA-approved lender rather than assuming a single decline is final.
Can I refinance out of an FHA loan later?
Yes, and for borrowers who put less than 10% down it is often the plan from the start. Once you have roughly 20% equity, refinancing into a conventional loan removes mortgage insurance entirely. The trade-off is closing costs on the new loan and whatever interest rate is available at that time — refinancing only pays off if the MIP saving outweighs both.
Can I use an FHA loan for an investment property?
No. FHA loans are for primary residences, and you are generally required to occupy the home within 60 days of closing and live in it for at least a year. You can, however, buy a two to four unit property with an FHA loan as long as you live in one of the units, which is a common way for first-time buyers to have tenants help cover the mortgage.
This calculator provides estimates for general informational purposes only and is not a loan offer, pre-qualification or lending advice. FHA mortgage insurance premiums, loan limits and eligibility requirements are set by HUD and change over time, and individual lenders apply their own additional requirements. Loan limits shown are the national single-family floor and ceiling — your county limit may differ. Confirm all figures with an FHA-approved lender and your official Loan Estimate.