Do FHA Loans Have PMI?

Do FHA Loans Have PMI?

If you’re thinking about getting an FHA loan, you may be wondering if PMI comes with the package. PMI stands for private mortgage insurance, and it’s a common cost for conventional loans when you put down less than 20%. But FHA loans work a little differently.

So, do FHA loans have PMI? Not exactly—but they do have their own type of mortgage insurance. In this article, we’ll explain what that is, how it works, and what it means for your monthly payments and long-term costs.

Let’s break it all down.

FHA Loans Don’t Have PMI—but They Have MIP

FHA loans don’t use PMI. Instead, they require MIP, which stands for mortgage insurance premium. While MIP and PMI both help protect lenders if a borrower defaults, they are not the same thing.

Here’s the difference:

• PMIis used for conventional loansand may be canceled when you reach 20% equity
• MIPis used for FHA loansand usually lasts much longer, sometimes for the life of the loan

So even though you won’t pay PMI with an FHA loan, you will pay MIP—and it’s not optional.

How MIP Works on an FHA Loan

FHA mortgage insurance comes in two parts:

1. Upfront MIP: A one-time payment due at closing, usually 1.75% of the loan amount. This can often be rolled into the loan if you don’t want to pay it upfront.
2. Annual MIP: A yearly fee broken into monthly payments, added to your mortgage bill.

For example, if you’re borrowing $200,000, your upfront MIP could be $3,500. Your monthly MIP might range from $60 to $150 depending on your loan size, term, and down payment.

So while FHA loans make it easier to qualify with low credit and a small down payment, you’ll need to factor in the added insurance cost when budgeting.

How Long Do You Have to Pay MIP?

Here’s where things get tricky. How long you’ll have to pay MIP depends on how much you put downwhen you buy the home.

• If you put less than 10% down, MIP lasts for the entire loan term
• If you put 10% or more down, MIP lasts for 11 years

That means many FHA buyers will pay mortgage insurance until they refinance or sell the home.

Can You Cancel MIP on an FHA Loan?

FHA loans do not allow you to cancel MIP automatically based on equity like conventional loans do with PMI. However, you can get rid of MIP by refinancing.

Once you’ve built enough equity in your home—usually about 20%—you may be able to refinance into a conventional loan without PMI. This is a smart option if:

• Your home has gone up in value
• Your credit score has improved
• You plan to stay in the home long-term

So even though FHA loans don’t have PMI, you’ll still want to keep an eye on your mortgage insurance and explore options to reduce or remove it later.

Why FHA Loans Require Mortgage Insurance

FHA loans are designed to help people buy homes with lower credit scores and smaller down payments. That makes them riskier for lenders. To offset that risk, the government requires MIP on every FHA loan.

This insurance helps keep FHA programs running and ensures that lenders continue to offer loans to borrowers who may not qualify through conventional options.

Is MIP Worth It?

Even with mortgage insurance, FHA loans can still be a great deal. They offer:

• Lower credit score requirements
• Down payments as low as 3.5%
• More flexible approval guidelines

If you’re a first-time buyer or don’t have a large down payment saved, the benefits of FHA loans often outweigh the cost of MIP—especially if you plan to refinance later.

Want Help With FHA Loans and MIP?

At Clear Mortgage LLC, we’re here to walk you through every part of the mortgage process—including how insurance like MIP affects your loan.

We’ll help you understand all the costs, compare loan options, and find the smartest path forward. If you’re thinking about an FHA loan or ready to refinance, we’ll make the process smooth, fast, and tailored to your needs.

Contact us todayto learn more about your FHA loan options and how to manage mortgage insurance the smart way.