What Is MIP (FHA Mortgage Insurance)?

MIP (Mortgage Insurance Premium) is insurance required on FHA loans that protects the lender if the borrower defaults. Unlike PMI used for conventional loans, MIP applies to all FHA loans regardless of down payment size.

✅ How FHA MIP Works

MIP has two parts:

  • Upfront Mortgage Insurance Premium (UFMIP): A one-time fee paid at closing, typically 1.75% of the loan amount.
  • Annual Mortgage Insurance Premium (Annual MIP): Paid monthly as part of the mortgage payment.

Example on a $300,000 FHA loan:

  • UFMIP (1.75%) = $5,250
  • Annual MIP (varies by loan term & LTV) ≈ $130–$200/month

UFMIP can be paid upfront or rolled into the loan amount.

📊 Why MIP Matters for FHA Borrowers

MIP exists to protect FHA lenders, but it affects borrower costs and monthly payments.

  • Lower barriers to entry: FHA allows lower credit scores and down payments.
  • Increased monthly payments: MIP adds cost to each payment.
  • Duration rules: Many FHA loans require MIP for at least 11 years or for the entire loan term, depending on LTV.
  • Refinancing potential: Borrowers often refinance into a conventional loan later to remove MIP.

💡 When Does MIP Fall Off?

FHA MIP rules depend on the down payment:

  • Down payment < 10%: MIP lasts for the **life of the loan**.
  • Down payment ≥ 10%: MIP lasts **11 years**.

Borrowers can remove MIP sooner by refinancing into a conventional loan.

🏡 FHA MIP & FSBO Transactions

FSBO sellers should understand MIP because it affects a buyer’s monthly affordability. Buyers using FHA loans may face slightly tighter budget constraints due to ongoing MIP costs.

However, FHA buyers are often highly motivated and fully qualified—FHA financing is common and reliable when properly pre-approved.

For more mortgage topics, visit the Mortgage Guide.