FHA mortgage insurance (MIP).
In plain English
MIP, or mortgage insurance premium, is what borrowers pay on an FHA loan in exchange for its low down payment. It has two parts. An upfront premium of 1.75 percent of the loan amount is charged at closing, often rolled into the loan. An annual premium, for most borrowers 0.55 percent of the balance since HUD lowered it in 2023, is split into monthly payments. Unlike private mortgage insurance on conventional loans, FHA MIP usually lasts the life of the loan unless you refinance out of it. It protects the lender if you stop paying, not you.
01Why it matters
MIP is a real, often permanent cost of an FHA loan, so knowing its size and that it usually does not fall off is central to comparing FHA against a conventional loan.
02The math, step by step
On a 300,000 dollar FHA loan, the upfront MIP is 1.75 percent, or 5,250 dollars, plus an annual 0.55 percent, about 1,650 dollars a year or 137 dollars a month, that typically continues for the life of the loan.
03What this is NOT
MIP does NOT protect you. It reimburses the lender if you default, and on most FHA loans it lasts the life of the loan rather than dropping off at 20 percent equity like conventional PMI.
04Receipts
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