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FHA Loans: Down Payments, Mortgage Insurance, and Monthly Costs
Understand FHA down payments, upfront and monthly mortgage insurance, and housing costs with a worked example and the free PFC FHA loan calculator.
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An FHA payment estimate is more useful when it separates the loan payment from mortgage insurance and other housing expenses. Start with a purchase price you want to explore, then use the free FHA loan calculator to build a monthly budget.
What does an FHA down payment cover?
FHA insures mortgages made by approved lenders. A qualifying buyer may be able to put down as little as 3.5% of the purchase price. That down payment is only one part of the cash needed to buy a home; it does not establish loan approval or cover every closing expense.
Source: HUD: FHA purchase loans.
Two mortgage insurance costs to understand
The standard purchase model uses an upfront mortgage insurance premium of 1.75% of the base loan. Paying it in cash keeps it out of the financed balance; financing it adds principal and interest to the loan payment.
Source: HUD Handbook 4000.1: upfront mortgage insurance.
Annual MIP is collected through periodic payments. Its rate and duration depend on loan terms and loan-to-value ratio. The modeled 30-year example below uses a 0.55% annual rate and MIP for the loan term. Under the standard duration table, initial LTV of 90% or less generally changes the duration to 11 years, or the loan term if shorter. This is different from automatically removing conventional PMI after building equity.
Source: HUD Mortgagee Letter 2023-05: annual MIP rates and duration.
A $300,000 purchase example
Assume 3.5% down, a hypothetical 6.5% fixed rate for 30 years, financed upfront MIP, $3,300 annual property tax, $1,800 annual homeowners insurance, and no HOA dues.
| Item | Amount |
|---|---|
| Down payment | $10,500.00 |
| Base loan | $289,500.00 |
| Upfront MIP | $5,066.25 |
| Financed loan | $294,566.25 |
| Approximate monthly MIP | $132.69 |
| Estimated initial housing payment | $2,419.55 |
The monthly MIP estimate uses the starting base loan for budgeting. Actual servicer calculations use the insured balance and can change. The housing total includes the entered taxes and insurance; those costs can also change.
Build your own comparison
- Enter the home price, down payment, quoted contract rate, and term.
- Compare paying upfront MIP in cash with financing it. Read the financed loan and monthly payment separately.
- Add your property tax, homeowners insurance, and HOA estimates. Review the breakdown and download the CSV.
The tool does not check credit, debt-to-income eligibility, appraisals, or county loan limits. Its $726,200 MIP rate-tier threshold is not a county loan limit. Closing costs are excluded; use the down payment calculator to explore a separate cash target, then reconcile both estimates with a lender’s Loan Estimate.