Every FHA loan carries mortgage insurance, and it's what lets FHA approve a buyer with 3.5% down and a 580 score. HUD charges it in two pieces. The upfront mortgage insurance premium is a one-time 1.75% of the base loan (the price minus your down payment), and most buyers add it to the loan instead of paying cash. The annual premium is a yearly percentage of the loan, divided into 12 monthly charges inside your house payment.
FHA's premium rates
For base loans of $726,200 or less, which covers most Florida purchases, HUD's rates under Mortgagee Letter 2023-05 are below. Larger base loans pay 0.20% more a year on terms over 15 years.
| Loan term | Down payment | Upfront | Annual | How long the annual premium lasts |
|---|---|---|---|---|
| Over 15 years | Less than 5% | 1.75% | 0.55% | Life of the loan |
| Over 15 years | 5% to under 10% | 1.75% | 0.50% | Life of the loan |
| Over 15 years | 10% or more | 1.75% | 0.50% | 11 years |
| 15 years or less | Less than 10% | 1.75% | 0.40% | Life of the loan |
| 15 years or less | 10% or more | 1.75% | 0.15% | 11 years |
HUD sets these by loan-to-value ratio (LTV), the base loan divided by the lower of the price or the appraised value. Less than 5% down means an LTV above 95%, and 10% down or more means 90% or less. Credit score plays no part. On FHA 100% financing, the premiums apply to the 96.5% FHA first mortgage only, and the down payment assistance second carries none.
The dollars on a $340,000 home
Here's one $340,000 single-family home at a 5.75% rate, four ways.
| 3.5% down, 30-year | 5% down, 30-year | 10% down, 30-year | 3.5% down, 15-year | |
|---|---|---|---|---|
| Down payment | $11,900 | $17,000 | $34,000 | $11,900 |
| Base loan | $328,100 | $323,000 | $306,000 | $328,100 |
| Upfront premium, financed | $5,741.75 | $5,652.50 | $5,355.00 | $5,741.75 |
| Annual rate | 0.55% | 0.50% | 0.50% | 0.40% |
| Monthly premium to start, about | $150.38 | $134.58 | $127.50 | $109.37 |
| Annual premium lasts | Life of the loan | Life of the loan | 11 years | Life of the loan |
Take the first column. The annual premium starts at 0.55% of $328,100, which is $1,804.55 a year, or about $150.38 a month. The financed upfront premium raises the loan to $333,841.75, and principal and interest rise from $1,914.70 to $1,948.21, so carrying the upfront premium costs $33.51 a month instead of $5,741.75 at the closing table.
HUD refigures the annual premium each year on the average balance, so the monthly charge slips a little lower every year as the loan is paid down.
How it compares with the other programs
- Conventional PMI is priced on your score. Near a 620 score with 3% down it runs about 1.50% a year, nearly three times FHA's 0.55%. At 760 and up it drops to about 0.46%, and it comes off once you owe 80% of the original value.
- USDA charges 1% upfront and 0.35% a year on homes in eligible rural areas.
- VA has no monthly mortgage insurance. It charges a one-time funding fee instead, 2.15% on a first-use purchase with less than 5% down, waived for veterans receiving VA disability compensation.
For most first-time buyers with scores in the 600s, FHA's flat premium is the cheaper monthly insurance. The PMI page has the Conventional rates by score.
Ways to pay less FHA mortgage insurance
Put 5% down instead of 3.5%. On this home, the extra $5,100 drops the annual rate to 0.50% and the monthly premium by $15.80.
Put 10% down. The premium then stops on its own after 11 years. A family gift can cover the down payment on FHA, and a relative selling you their home can give equity toward it.
Refinance later. Once you owe 80% or less of the home's value, a Conventional refinance carries no mortgage insurance at all. The FHA mortgage insurance removal page runs the numbers.
Ask for a seller credit. It can pay the upfront premium so the loan stays at the base amount.
The mortgage payment calculator shows FHA mortgage insurance on its own line at any price and down payment. Call AAA Capital Funding at 888-601-8344 and we'll set FHA's premium beside Conventional PMI at your actual score.