FHA Loan Calculator
An FHA loan requires a minimum 3.5% down payment for borrowers with a 580 or higher credit score and carries two layers of mortgage insurance: a one-time upfront MIP of 1.75% of the loan amount (typically financed into the loan) and an annual MIP of 0.55% for most 30-year loans with less than 10% down (per HUD's 2023 guidelines), divided into 12 monthly installments. The calculator above shows principal and interest on your loan amount after financing the upfront MIP. The critical non-obvious fact: unlike conventional PMI, FHA annual MIP remains for the life of the loan if you put less than 10% down — it does not automatically cancel at 20% equity, so many FHA borrowers refinance to conventional once they reach 20% to shed the ongoing insurance cost.
How it's calculated
FHA loans are insured by the Federal Housing Administration, part of HUD, which allows lenders to offer more lenient qualifying terms. With a 580+ credit score, you need only 3.5% down. With a 500–579 credit score, the minimum down payment rises to 10%.
The upfront MIP (UFMIP) equals 1.75% of the base loan amount. If you do not pay it at closing, it is added to your loan balance. On a $337,750 loan (3.5% down on $350,000), the UFMIP is $5,910.63, making your total financed amount $343,660.63. The annual MIP for a 30-year loan with less than 10% down is 0.55% of the average outstanding balance, per HUD. Divide by 12 to get the monthly MIP — roughly $157 per month on that loan. Together, P&I plus monthly MIP is your true FHA monthly housing cost.
FHA vs Conventional loan — head-to-head: FHA requires only 3.5% down (vs 5% conventional) and accepts credit scores as low as 580, but charges MIP for the life of the loan (if less than 10% down). Conventional loans with 20%+ down have no PMI at all; with less than 20%, PMI cancels automatically at 20% equity (unlike FHA). On credit score, conventional loans reward 720+ borrowers with lower PMI rates that can fall below FHA MIP. Debt-to-income (DTI): FHA allows up to 43–50% DTI; conventional typically caps at 43–45%. Loan limits: both follow conforming limits in most markets, but FHA has its own county-level maximums. The verdict: choose FHA when your credit score is below 680 or you need sub-5% down with minimal savings. Choose conventional when your credit score is 680+ and you can put 5–20% down — you'll likely pay less in long-term insurance costs and can drop PMI, unlike FHA MIP.
A worked example
You buy a $350,000 home with 3.5% down ($12,250). Your base loan is $337,750. The UFMIP at 1.75% is $5,910.63, financed into the loan for a total balance of $343,660.63. At 6.5% for 30 years, P&I is $2,172.14 per month. Annual MIP at 0.55% on $343,660.63 is $1,890.13 per year, or $157.51 per month. Total monthly payment (P&I + MIP): $2,329.65. By contrast, a conventional loan at 6.75% on the same home with 3.5% down and PMI at 1.0% annually would run $2,211 P&I plus $276 PMI = $2,487 per month initially — more per month, but PMI cancels once you reach 20% equity.
Common mistakes to avoid
- Assuming FHA MIP cancels at 20% equity like conventional PMI. For loans with less than 10% down originated after June 2013, FHA annual MIP stays for the full loan term per HUD rules — you must refinance to a conventional loan to remove it.
- Forgetting to add the UFMIP to the loan amount. If you finance the upfront MIP, your loan balance is 1.75% larger than the purchase price minus down payment.
- Not comparing the true cost to conventional PMI. At higher credit scores (720+), conventional PMI can be cheaper than FHA MIP, and conventional PMI cancels at 20% equity.
- Using FHA limits without checking local maximums. FHA sets loan limits by county. In high-cost areas the 2024 ceiling is $1,149,825; in lower-cost areas it can be as low as $498,257. You cannot borrow above your county's limit.
- Overlooking FHA streamline refinances. Once you have an FHA loan, an FHA streamline refinance requires less documentation and no new appraisal, making it easier to lower your rate later.
Frequently asked questions
What is FHA mortgage insurance and how long do I pay it?
FHA mortgage insurance has two parts: a one-time upfront MIP of 1.75% of the loan amount, and an annual MIP charged monthly. For 30-year loans with less than 10% down, annual MIP continues for the life of the loan per HUD rules. With 10% or more down, annual MIP cancels after 11 years.
What credit score do I need for an FHA loan?
You need a 580 or higher credit score to qualify for the 3.5% minimum down payment. With a score between 500 and 579, FHA requires a 10% down payment. Scores below 500 do not qualify for FHA financing, per HUD guidelines.
How does FHA compare to conventional for first-time buyers?
FHA offers a lower down payment (3.5% vs. 5% for most conventional loans) and accepts lower credit scores. But FHA MIP can be more expensive long-term than conventional PMI, especially if you have strong credit. Once you have 20% equity, conventional loans let you drop PMI — FHA does not unless you refinance.
What are the FHA loan limits for 2024?
FHA loan limits vary by county. For 2024, the national floor is $498,257 for a single-family home in lower-cost areas. The ceiling in high-cost areas is $1,149,825. Check HUD's website for your specific county limit before shopping for a home.
Can I refinance out of FHA to remove MIP?
Yes. Once you reach 20% equity, you can refinance into a conventional loan and eliminate MIP entirely. This is one of the most common strategies for FHA borrowers, especially after home values rise. Compare the cost of refinancing against the ongoing MIP savings to find your break-even. See our refinance calculator for the analysis.
Is an FHA loan better than a conventional loan for first-time buyers?
FHA wins when your credit score is below 680 or your savings limit you to 3.5% down — FHA's minimum. Conventional wins when your score is 680+ and you can put 5–20% down: conventional PMI rates are lower for strong-credit borrowers and PMI cancels automatically at 20% equity. FHA MIP does not cancel unless you refinance (for loans with less than 10% down). On a $300,000 loan, a 720-credit-score borrower often pays less total insurance cost with conventional PMI over 7 years than with FHA MIP. Use the mortgage calculator to model your own numbers and compare total cost for both loan types side by side.