Mortgage Insurance (MIP)

Mortgage insurance protects the lender when a borrower puts down less than 20 percent, and FHA loans carry their own version called the mortgage insurance premium, or MIP. It is distinct from conventional private mortgage insurance (PMI) in both how it is priced and how long it lasts.

FHA MIP has two parts: an upfront premium of 1.75 percent of the loan, often financed into the balance, and an annual premium paid monthly. Under HUD Mortgagee Letter 2023-05, the annual premium fell to about 0.55 percent for most new borrowers (from 0.85 percent) for mortgages endorsed on or after March 20, 2023. The bigger difference is duration: with less than 10 percent down, MIP generally lasts the life of the loan, while with 10 percent or more down it drops off after 11 years. Conventional PMI, by contrast, can usually be cancelled near 20 percent equity.

Premiums vary by loan term, loan-to-value, and loan size, and the rules change over time, so confirm the current figures for your specific loan with a lender.