CalcPro

FHA Loan Calculator

FHA payment with the 1.75% upfront MIP financed and monthly mortgage insurance.

How it works

An FHA loan lets you buy a home with a smaller down payment than a conventional mortgage—as little as 3.5%—because the loan is insured by the Federal Housing Administration. The calculator accounts for both the upfront mortgage insurance premium (MIP) that gets rolled into your loan and the annual MIP paid monthly.

The process has three stages: first, your down payment and home price determine the base loan amount; second, the upfront MIP (1.75% of that loan) is added to create the financed loan total; third, your monthly payment covers principal, interest, property taxes, homeowners insurance, and the annual MIP—all rolled into one figure.

The formula

Monthly Payment = [P × (r(1+r)^n) / ((1+r)^n − 1)] + Annual MIP ÷ 12

where P = financed loan amount (including upfront MIP), r = monthly interest rate, and n = number of monthly payments.

Worked example

Let's say you're buying a $300,000 home with a 3.5% down payment, a 6.5% annual interest rate, a 30-year term, and a 0.55% annual MIP.

Step 1: Calculate down payment and base loan

  • Down payment: $300,000 × 0.035 = $10,500
  • Base loan: $300,000 − $10,500 = $289,500

Step 2: Add upfront MIP

  • Upfront MIP: $289,500 × 0.0175 = $5,066.25
  • Financed loan total: $289,500 + $5,066.25 = $294,566.25

Step 3: Calculate monthly principal and interest

  • Monthly rate: 6.5% ÷ 12 = 0.541667% = 0.00541667
  • Number of payments: 30 × 12 = 360
  • Monthly P&I: $294,566.25 × [0.00541667(1.00541667)^360] / [(1.00541667)^360 − 1]
  • Monthly P&I ≈ $1,859.29

Step 4: Calculate annual MIP payment

  • Annual MIP: $294,566.25 × 0.0055 = $1,620.11
  • Monthly MIP: $1,620.11 ÷ 12 ≈ $135.01

Step 5: Total monthly payment

  • Total: $1,859.29 + $135.01 = $1,994.30

Note: This is principal, interest, and mortgage insurance only. Your actual monthly housing payment will be higher if it includes property taxes, homeowners insurance, and HOA fees.

Common mistakes

Forgetting the upfront MIP. The 1.75% upfront premium is not a separate fee you pay at closing—it's financed into the loan, so your monthly payment reflects interest paid on it too. Don't calculate the payment on the base loan alone.

Confusing MIP with PMI. Private mortgage insurance (PMI) is for conventional loans. FHA uses MIP, which is typically more expensive but allows lower down payments. They're calculated and removed differently.

Using the wrong annual MIP rate. Standard rates are 0.55% for loans with 5% or more down, and 0.80% for loans under 5% down, but your lender may quote different amounts. Always confirm the exact rate.

Ignoring taxes and insurance. This calculator shows your mortgage insurance and loan payment, but your true housing cost includes property tax, homeowners insurance, and possibly HOA fees. Budget for those separately.

Frequently asked questions

What is FHA mortgage insurance (MIP)?

FHA mortgage insurance protects the lender if you default. It has two parts: an upfront premium (typically 1.75% of the loan amount, often financed into the loan) and an annual premium paid monthly. This insurance allows borrowers to qualify with lower down payments and credit scores.

Can I avoid paying mortgage insurance on an FHA loan?

No. All FHA loans require both upfront and annual mortgage insurance. However, annual MIP drops off after 10 years if your down payment was 10% or more, or after the loan is paid to 78% of the original home value.

What down payment do I need for an FHA loan?

FHA loans require a minimum 3.5% down payment. Some programs allow lower amounts, but 3.5% is the standard minimum. This is much lower than conventional loans, which typically require 5–20%.

How does the upfront MIP get included in my payment?

The upfront MIP (1.75% of the loan amount) is calculated and added to your base loan amount. You then pay interest and principal on this larger total, spreading the insurance cost across your entire loan term.

Does the annual MIP rate change over time?

The annual MIP percentage you enter is typically fixed for the life of the loan (or until it drops off). However, the dollar amount of your monthly MIP payment decreases as your loan balance shrinks, because it's calculated on the remaining balance.

What interest rate should I use?

Use your FHA loan's annual interest rate (APR). This varies by lender, credit score, and market conditions. Check with lenders for current rates, or use a recent rate quote.

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