What Is MIP (Mortgage Insurance Premium)?
MIP (Mortgage Insurance Premium) is the insurance required on FHA loans. Unlike PMI on conventional loans, FHA MIP has two parts: an upfront premium (1.75% of the loan amount, usually rolled into the loan) and an annual premium (typically 0.55%) paid monthly.
Key Facts
- FHA MIP is required regardless of your down payment amount.
- The upfront MIP (1.75%) is typically financed into the loan — you don't pay it out of pocket.
- For loans with less than 10% down, MIP lasts the entire life of the loan.
- For loans with 10%+ down, MIP drops off after 11 years.
- Many buyers refinance from FHA to conventional once they reach 20% equity to eliminate MIP.
Real-World Example
You get an FHA loan for $550,000. The upfront MIP is $9,625 (added to your loan balance, making it $559,625). The annual MIP at 0.55% adds about $252/month to your payment.
Why It Matters
MIP makes FHA loans more expensive than they first appear. Factor in both the upfront and monthly costs when comparing FHA to conventional options. If you plan to stay long-term, consider whether paying slightly more upfront for a conventional loan saves you money over time.
En Español
El MIP (Prima de Seguro Hipotecario) es el seguro requerido en préstamos FHA. A diferencia del PMI en préstamos convencionales, el MIP de FHA tiene dos partes: una prima inicial (1.75% del monto del préstamo, generalmente incluida en el préstamo) y una prima anual (típicamente 0.55%) que se paga mensualmente.