Calculate your FHA loan payment with just 3.5% down. See upfront and monthly MIP costs, total loan cost, and how FHA compares to conventional loans for first-time homebuyers.
Key FHA requirements, limits, and costs for 2024
Enter your home price, down payment, and credit score to see your complete FHA monthly payment including MIP and compare to a conventional loan.
Open Mortgage Calculator →An FHA loan is a mortgage insured by the Federal Housing Administration, a federal agency that has been helping Americans achieve homeownership since 1934. Because the government guarantees the lender against loss if the borrower defaults, FHA-approved lenders can offer significantly more lenient qualification standards than conventional loans — making homeownership accessible to buyers with smaller down payments, lower credit scores, or shorter credit histories.
FHA loans are originated by private lenders (banks, credit unions, mortgage companies) and insured by the FHA. You pay for this insurance through mortgage insurance premiums (MIP) — both upfront and monthly. This cost is the trade-off for the more accessible qualification standards.
FHA requires just 3.5% down for borrowers with a credit score of 580 or higher. On a $300,000 home, that's $10,500 — compared to $60,000 for a 20% conventional down payment. This dramatically lowers the barrier to homeownership, especially for first-time buyers who haven't had time to accumulate substantial savings. Borrowers with credit scores between 500–579 can still qualify but must put down 10%.
Conventional loans typically require a minimum credit score of 620–640 for approval, with the best rates requiring 740+. FHA accepts scores as low as 580 (for 3.5% down) and even 500–579 (with 10% down). FHA also tends to be more forgiving of past financial issues like bankruptcies (2-year waiting period vs. 4 years conventional) and foreclosures (3-year waiting period vs. 7 years conventional).
FHA allows debt-to-income ratios up to 43% (sometimes up to 50% with compensating factors like substantial reserves or a high credit score). Conventional loans typically cap DTI at 43–45%. This higher tolerance helps buyers with student loans or other existing debt qualify for a mortgage they otherwise couldn't get.
The main downside of FHA loans is Mortgage Insurance Premium (MIP), which comes in two forms. The Upfront MIP is 1.75% of the loan amount — on a $300,000 loan, that's $5,250, typically rolled into the loan balance. The Annual MIP is currently 0.55% of the loan balance for most borrowers, paid monthly — that's $137.50/month on a $300,000 loan.
The critical problem with FHA MIP: for loans originated after June 2013 with a down payment less than 10%, MIP is required for the entire life of the loan. Unlike conventional PMI (which cancels at 80% LTV), FHA MIP does not automatically cancel. The solution is refinancing to a conventional loan once you reach 20% equity — at that point, the conventional loan has no PMI and eliminates MIP costs entirely.
FHA wins when: your credit score is below 680, you have less than 5% for a down payment, or you have a higher DTI ratio. Conventional wins when: your credit score is 700+, you can put down 20%+ (no PMI), or you want to avoid lifetime MIP. For many buyers, the path is FHA first → build equity → refinance to conventional to eliminate MIP. This strategy gets you into a home faster while keeping long-term costs manageable.
An FHA loan is a government-insured mortgage with more flexible qualifications: 3.5% min down payment (with 580+ credit score), lower credit score requirements, and higher DTI tolerance. Most popular with first-time homebuyers and those with limited savings or imperfect credit. Insured by HUD's Federal Housing Administration.
Two components: (1) Upfront MIP: 1.75% of loan amount ($5,250 on $300K, usually rolled in). (2) Annual MIP: 0.55–1.05% per year, paid monthly ($137.50/mo on $300K at 0.55%). For most FHA loans with less than 10% down (originated after June 2013), MIP is required for the full life of the loan.
Refinance to a conventional loan once you have 20% equity (80% LTV). You can reach 20% through mortgage payments and/or home value appreciation (confirmed by appraisal). The conventional loan has no PMI at 80% LTV, eliminating the $100–$200/month MIP cost permanently. Calculate the refinance break-even to determine optimal timing.
Standard limit: $498,257 for a single-family home in most US counties. High-cost areas: up to $1,149,825 (parts of CA, NY, HI). Limits are set by county — check HUD's website for your specific area. To borrow above these limits, you'll need a conventional jumbo or portfolio loan.