FHA Mortgage Insurance Explained: The Upfront Premium, the Annual Charge and How Long Borrowers Pay It

Loans insured by the Federal Housing Administration, all of which carry FHA mortgage insurance, accounted for 16.4% of all mortgage applications in the week ended Oct. 9, 2026, according to the Mortgage Bankers Association, and the average contract rate on a 30-year FHA loan was 7.19%, below the 7.50% average on conventional conforming balances. That lower note rate comes with a cost that conventional borrowers with large down payments do not pay: an insurance premium priced differently from the private mortgage insurance used on conventional loans.

How much is FHA mortgage insurance?

FHA charges two separate premiums. The first is an upfront mortgage insurance premium of 1.75% of the base loan amount, set out in Mortgagee Letter 2023-05 from the Department of Housing and Urban Development. The Consumer Financial Protection Bureau notes that borrowers who do not have the cash to pay this fee at closing may roll it into the mortgage, which raises both the loan amount and the total cost of the loan.

The second is an annual premium, billed monthly as part of the mortgage payment. Under the schedule HUD adopted for loans endorsed on or after March 20, 2023, a borrower with a term longer than 15 years and a base loan amount at or below the national conforming loan limit pays 0.50% a year if the loan-to-value ratio is 95% or less, and 0.55% a year if it is above 95%. A buyer making the minimum 3.5% down payment falls in the higher bracket. HUD tied that loan-size threshold to the national conforming limit, which the agency's 2026 loan-limit letter puts at $832,750. Larger balances carry 0.70% or 0.75%. Loans with terms of 15 years or less are priced lower, at 0.15% to 0.40% for balances at or below the threshold.

How long do you pay FHA mortgage insurance?

The schedule also determines how long the annual premium lasts. If the loan-to-value ratio at origination is 90% or less, meaning the borrower put down at least 10%, the annual premium runs for 11 years. Above 90%, it runs for the life of the mortgage. HUD's guidance on discontinuing premiums states that for FHA cases assigned on or after June 3, 2013, the insurance ends when the mortgage is paid in full, which in practice means a sale or a refinance for borrowers in the life-of-loan category.

In practice, the upfront premium is a set percentage of the base loan amount, while the annual premium is a percentage of the loan balance, so it declines slowly as the balance is paid down. A larger down payment lowers the base loan, can move the borrower into the lower annual bracket and, at 10% or more, limits the annual premium to 11 years. The exact upfront and monthly premium amounts for a specific loan appear on the Loan Estimate, which lenders must provide for each application.

How does FHA mortgage insurance compare with PMI?

That structure is the main difference from conventional loans. The CFPB says FHA insurance costs the same regardless of credit score, with only a slight increase for down payments under 5%, while private mortgage insurance on conventional loans is priced by down payment and credit score and is generally cheaper than FHA coverage for borrowers with good credit. Private mortgage insurance can also be canceled under certain circumstances once the loan balance falls, while most low-down-payment FHA borrowers keep paying until the loan is retired.

FHA loans also carry their own size limits. For 2026, HUD set the one-unit FHA limit for the Nashville metropolitan area, including Davidson, Williamson, Rutherford, Sumner, Wilson, Maury, Robertson, Cheatham and Dickson counties, at $1,029,250, between the national floor of $541,287 and the ceiling of $1,249,125. Buyers comparing an FHA loan with a conventional loan generally need to weigh the lower FHA note rate against the upfront premium, the annual charge and, for those putting down less than 10%, the expectation that the insurance remains until the loan is paid off.

Frequently asked questions

Can the upfront FHA premium be financed?

Yes. The upfront premium is 1.75% of the base loan amount, and the CFPB notes that borrowers who do not have the cash at closing may roll it into the mortgage, which raises both the loan amount and the total cost of the loan.

Does FHA mortgage insurance ever go away?

If the loan-to-value ratio at origination is 90% or less, meaning the borrower put down at least 10%, the annual premium runs for 11 years. Above 90%, it runs for the life of the mortgage, which in practice means until a sale or a refinance.

Does credit score change the FHA premium?

No. The CFPB says FHA insurance costs the same regardless of credit score, with only a slight increase for down payments under 5%.

Sources

• Mortgage Bankers Association, "Mortgage Applications Decrease in Latest MBA Weekly Survey," Oct. 14, 2026: https://www.mba.org/news-and-research/newsroom/news/2026/10/14/mortgage-applications-decrease-in-latest-mba-weekly-survey
• U.S. Department of Housing and Urban Development, Mortgagee Letter 2023-05, "Reduction of Federal Housing Administration (FHA) Annual Mortgage Insurance Premium (MIP) Rates," Feb. 22, 2023: https://archives.hud.gov/news/2023/2023-05hsgml.pdf
• U.S. Department of Housing and Urban Development, Mortgagee Letter 2025-23, "2026 Nationwide Forward Mortgage Loan Limits," Dec. 11, 2025: https://www.hud.gov/sites/dfiles/hudclips/documents/2025-23hsgml.pdf
• U.S. Department of Housing and Urban Development, FHA 2026 Areas Above Floor and Below Ceiling: https://www.hud.gov/sites/dfiles/SFH/documents/FHA-2026-Areas-Above-Floor-and-Below-Ceiling.pdf
• U.S. Department of Housing and Urban Development, Single Family Mortgage Insurance Premiums (Discontinuing Monthly Mortgage Insurance Premium Payments): https://www.hud.gov/hud-partners/housing-mip
• Consumer Financial Protection Bureau, "What is mortgage insurance and how does it work?" (last reviewed Aug. 28, 2026): https://www.consumerfinance.gov/ask-cfpb/what-is-mortgage-insurance-and-how-does-it-work-en-1953/