Yes, FHA loans require mortgage insurance — and it works a bit differently than the PMI attached to conventional loans. Here's what you need to know.
What Is an FHA Loan?
An FHA loan is a mortgage backed by the Federal Housing Administration. The FHA doesn't lend money directly; instead, it insures the loan, which allows approved lenders to offer financing to buyers who might not qualify for a conventional mortgage. The main draw is a lower down payment requirement — typically as low as 3.5% for buyers who meet the credit score threshold.
How FHA Mortgage Insurance Works
Because the FHA is taking on additional risk by backing loans with smaller down payments, it requires borrowers to pay mortgage insurance premiums (MIP) — not to be confused with PMI, though they serve a similar purpose.
FHA mortgage insurance comes in two parts:
- Upfront MIP: A one-time premium paid at closing (or rolled into the loan balance).
- Annual MIP: Paid monthly as part of your mortgage payment.
How long do you pay the annual premium? That depends on your down payment. If you put down 10% or more, the annual MIP falls off after 11 years. If you put down less than 10%, the premium typically remains for the life of the loan — unless you refinance into a conventional mortgage once you've built sufficient equity.
Who Can Use an FHA Loan?
FHA loans are often associated with first-time buyers, but there's no rule limiting them to first purchases. Anyone can apply for FHA financing, regardless of whether they've owned a home before. There are no income caps, though you do need to qualify for the loan amount based on your debt-to-income ratio and other standard lending criteria.
For buyers who want a low down payment and have a credit score in the 580–619 range, FHA financing is often worth a close look — it may be more accessible than a conventional option at that credit level.
Curious whether an FHA loan makes sense for your situation? Explore FHA loans on our site or reach out to talk through your options.
