FHA Loan Calculator
An FHA loan is a mortgage insured by the Federal Housing Administration. It exists to help buyers who do not fit the conventional mold — first-time buyers, people with thin or bruised credit, and anyone who simply has not saved a 20% down payment. The headline draw is the 3.5% minimum down payment for borrowers with a credit score of 580 or higher, which is a fraction of what a conventional loan typically expects.
That low barrier comes with a trade-off that catches a lot of first-time buyers off guard: mortgage insurance premiums (MIP). Every FHA loan carries two of them. There is a one-time upfront premium of 1.75% of the loan amount (usually rolled into the balance rather than paid in cash), and an annual premium — 0.55% here — that is split into twelve pieces and added to your payment every month. So your true monthly cost is not just principal and interest; it is principal, interest, and MIP.
Take the default scenario: a $300,000 home with 3.5% down. You put down $10,500 and borrow $289,500. At an illustrative 6.5% over 30 years, the principal-and-interest payment is $1,830, and the monthly MIP of $133 pushes the total to $1,963 a month. On top of that, the 1.75% upfront premium adds $5,066 to your loan balance from day one. The rates on this page are illustrative — your actual interest rate and MIP factors depend on your lender, credit profile and the loan term.
How the calculator builds an FHA payment
Step 1 — Loan amount
The base loan is the price minus your down payment:
Loan = Home price × (1 − down payment %) = $300,000 × (1 − 3.5%) = $289,500
Step 2 — Mortgage insurance premiums (MIP)
FHA loans carry two separate premiums:
| Premium | Formula | This scenario |
|---|---|---|
| Upfront MIP (one-time) | Loan × 1.75% | $289,500 × 1.75% = $5,066 |
| Annual MIP | Loan × 0.55% | $289,500 × 0.55% = $1,592 |
| Monthly MIP | Annual MIP ÷ 12 | $1,592 ÷ 12 = $133 |
The upfront premium is typically financed (added to the loan balance), not paid out of pocket. The annual premium is collected monthly, baked into your regular payment.
Step 3 — Principal & interest (P&I)
P&I uses the standard amortization formula:
P&I = L × r / (1 − (1 + r)⁻ⁿ)
where L is the loan amount, r is the monthly rate (annual rate ÷ 12), and n is the number of months (years × 12). Here: $289,500 at 6.5% ÷ 12 over 360 months = $1,830 per month.
Step 4 — Total monthly payment
Total = P&I + monthly MIP = $1,830 + $133 = $1,963
This excludes property taxes, homeowners insurance and any HOA dues, which a lender collects in escrow on top of the figure above. The calculator focuses on the loan-and-MIP portion so you can see the true cost of the FHA structure itself.
Worked example: a $300,000 home, 3.5% down
Assumptions: a 6.5% fixed interest rate over 30 years, a 1.75% upfront MIP and a 0.55% annual MIP (all illustrative — confirm your own figures with a lender).
| Item | Amount |
|---|---|
| Home price | $300,000 |
| Down payment (3.5%) | $10,500 |
| Base loan amount | $289,500 |
| Upfront MIP (1.75%, financed) | $5,066 |
| Monthly principal & interest | $1,830 |
| Monthly MIP (0.55% ÷ 12) | $133 |
| Total monthly payment | $1,963 |
Two things are worth sitting with.
- MIP is a real, recurring cost. The $133 monthly premium is roughly 7% of your payment, and on a standard FHA loan it does not automatically fall off — for loans with the minimum down payment, the annual MIP usually lasts the life of the loan unless you refinance into a conventional mortgage later.
- Compare it against going conventional. If you had 20% ($60,000) to put down on the same home, you would borrow $240,000 and — with no mortgage insurance — pay about $1,517 a month in P&I. That is lower than the FHA total of $1,963, but it requires $49,500 more cash up front. The FHA loan trades a smaller down payment for a higher monthly cost and the upfront premium.
Run your own numbers above, then pair this with FiMo's mortgage and down-payment calculators to see which structure fits your savings and your timeline.
Frequently asked questions
What is an FHA loan and who is it for?
An FHA loan is a mortgage insured by the Federal Housing Administration. It is aimed at buyers who can't easily qualify for a conventional loan — first-time buyers, people with limited or lower credit, and anyone short of a 20% down payment. The main draw is a 3.5% minimum down payment (with a 580+ credit score). The trade-off is mandatory mortgage insurance (MIP). In the default example, a $300,000 home with 3.5% down means a $289,500 loan at $1,963/month including MIP.
How is the FHA monthly payment calculated?
Your FHA payment is principal & interest plus monthly MIP. P&I uses the standard amortization formula L × r / (1 − (1 + r)⁻ⁿ), and monthly MIP is the annual MIP factor (0.55% of the loan) divided by 12. Worked example: a $289,500 loan at 6.5% over 30 years gives $1,830 of P&I, plus $133 of MIP, for a total of $1,963 a month. Property taxes and homeowners insurance are extra, collected in escrow.
What is the upfront MIP and do I pay it in cash?
The upfront mortgage insurance premium is a one-time charge of 1.75% of the loan amount. On a $289,500 loan that's $5,066. You usually do not pay it in cash at closing — most borrowers finance it into the loan balance, so it's spread across your payments along with the rest of the principal. That convenience means you also pay interest on it over the life of the loan.
Does FHA mortgage insurance ever go away?
It depends on your down payment. For loans with the minimum 3.5% down, the annual MIP generally lasts the entire life of the loan — it does not cancel automatically the way conventional PMI does at 78% loan-to-value. The most common way to drop it is to refinance into a conventional loan once you have enough equity (typically 20%). If you put more than 10% down, the annual MIP can end after 11 years.
FHA loan vs conventional: which is cheaper?
It depends on cash and credit. FHA needs only 3.5% down but charges MIP for the life of the loan. On the $300,000 example, FHA costs $1,963/month. A conventional loan with 20% down ($60,000) borrows $240,000 and — with no mortgage insurance — runs about $1,517/month, lower, but it needs $49,500 more up front. FHA wins on the down payment; conventional usually wins on long-run cost once you have 20% saved.
What does this FHA calculator leave out?
The total here is loan principal, interest and MIP only. It excludes property taxes, homeowners insurance and HOA dues, which a lender collects monthly in an escrow account on top of this figure. It also uses illustrative rates: the 6.5% interest, 1.75% upfront MIP and 0.55% annual MIP are assumptions. Real FHA MIP factors vary by loan term and loan-to-value ratio, and your interest rate depends on your lender and credit profile — confirm the exact numbers before committing.