FHA Loan Calculator
FHA loans let you buy a home with just 3.5% down, but they come with mortgage insurance costs. This calculator shows your full monthly payment including both upfront and ongoing MIP.
How FHA Loans Actually Work
FHA loans exist to make homeownership accessible to people who can't meet conventional loan requirements. The Federal Housing Administration doesn't lend money—it insures loans, which reduces risk for lenders and lets them offer better terms to borrowers with lower credit scores or smaller down payments.
The trade-off is mortgage insurance. Conventional loans require PMI only until you hit 20% equity. FHA loans charge MIP upfront and monthly for the life of the loan (unless you put down at least 10%, in which case it drops after 11 years). This makes FHA loans more expensive long-term but more accessible upfront.
FHA loans cap at county-specific limits, ranging from $498,257 in low-cost areas to $1,149,825 in high-cost markets. These limits reset annually. If you're buying above the limit, FHA isn't an option—you'll need a conventional or jumbo loan.
The True Cost of FHA Mortgage Insurance
Upfront MIP runs 1.75% of the base loan amount and gets added to your mortgage balance. On a $288,500 loan (a $300,000 home with 3.5% down), that's $5,049 you'll finance and pay interest on for 30 years. It's not cash out of pocket, but it's still a real cost.
Monthly MIP depends on loan term, loan-to-value ratio, and loan size. For a 30-year loan with less than 5% down, expect 0.85% annually. That same $288,500 loan carries $204 per month in MIP—$2,448 per year, or $73,440 over 30 years if you never refinance.
Compare that to conventional PMI, which costs roughly the same monthly but disappears once you hit 20% equity. On a conventional loan with 5% down, PMI might drop off after seven to ten years as you pay down the balance and the home appreciates. FHA MIP never goes away unless you refinance, making FHA loans progressively worse deals the longer you hold them.
When FHA Makes Sense (and When It Doesn't)
FHA loans shine for buyers with credit scores in the 580 to 680 range. Conventional loans either reject these borrowers outright or charge interest rates high enough to offset any MIP savings. If your score is 620 and a conventional lender quotes you 7.5% while FHA offers 6.5%, the FHA loan wins even with MIP factored in.
They also work well when you're short on cash for down payment and closing costs. Scraping together 3.5% is far easier than 5% or 20%, and FHA allows gifted funds from family or down payment assistance programs, broadening your options. Seller concessions up to 6% of the purchase price can cover most closing costs, reducing your cash to close to nearly zero.
FHA becomes a poor choice when you have strong credit and plan to stay in the home long-term. A borrower with a 740 credit score and 5% down will almost always pay less with a conventional loan once PMI drops off. Run the break-even analysis: calculate total payments over 10, 15, and 20 years for both loan types. If conventional saves you $30,000 over 15 years, the decision is obvious.
Frequently Asked Questions
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration. It allows down payments as low as 3.5% and accepts lower credit scores than conventional loans.
What is MIP and how much does it cost?
Mortgage Insurance Premium (MIP) protects the lender if you default. FHA charges 1.75% upfront (rolled into the loan) plus 0.45% to 0.85% annually, paid monthly.
Can I remove MIP from an FHA loan?
Only if you put down at least 10% and wait 11 years, or refinance to a conventional loan once you have 20% equity. Otherwise, MIP lasts the life of the loan.
What credit score do I need for an FHA loan?
Technically 500, but most lenders require 580 minimum for 3.5% down. Scores below 580 require 10% down. Above 620 gets better terms.
Should I choose FHA or conventional with low down payment?
If your credit score is below 680 or you have limited savings, FHA often wins. Above 700 with stable income, conventional 3% down programs may cost less long-term.