Costs & insurance
MIP (Mortgage Insurance Premium)
The mortgage insurance charged on FHA loans — an upfront premium of 1.75% plus an annual premium that, at minimum down payment, lasts the life of the loan.
What does MIP mean?
MIP is FHA's version of mortgage insurance, and it works differently from conventional PMI in one costly way: with the minimum 3.5% down, the annual premium doesn't cancel — it stays for the life of the loan.
FHA charges an upfront premium of 1.75% (usually financed into the balance) plus that ongoing annual premium of roughly 0.55%, split monthly.
The lasting nature of MIP is exactly why the standard FHA exit strategy is to build 20% equity and refinance into a conventional loan to shed the insurance entirely.
A Michigan example
On a $275,000 FHA loan, the upfront 1.75% premium adds about $4,813, typically rolled into the balance. The annual premium near 0.55% is roughly $1,513 a year, or about $126 a month, on top of principal and interest.