What Is Mortgage Insurance Premium (MIP) for FHA Loans in San Diego?

What Is FHA MIP?

FHA Mortgage Insurance Premium (MIP) is the insurance paid by FHA loan borrowers to protect the FHA against losses if the borrower defaults. Unlike conventional PMI which only protects the lender, MIP is paid to the government. It is one of the most significant ongoing costs of FHA financing that buyers must factor into their affordability calculations.

Two Types of FHA MIP

• Upfront MIP (UFMIP): 1.75 percent of the base loan amount — charged at closing but typically rolled into the loan
• Annual MIP: Charged monthly, divided into 12 payments — the rate depends on loan term, loan amount, and down payment

Current FHA Annual MIP Rates

For most 30-year FHA loans with less than 10 percent down, the annual MIP rate is currently 0.55 percent of the outstanding loan balance. On a $500,000 FHA loan, this equals approximately $229 per month — or $2,750 per year. This ongoing cost remains for the life of the loan when the down payment is less than 10 percent.

How FHA MIP Compares to Conventional PMI

Conventional PMI typically costs 0.5 to 1.5 percent annually — potentially higher than FHA MIP for some loan scenarios. However, conventional PMI can be canceled when the borrower reaches 20 percent equity, while FHA MIP for less-than-10-percent-down loans continues for the full loan term. For buyers planning to stay long-term, this makes the total MIP cost of FHA significantly higher.

When to Consider Refinancing Out of FHA

Many San Diego buyers use FHA to get into a home and then refinance to a conventional loan once they have built 20 percent equity — either through appreciation or principal paydown. This strategy allows FHA access at purchase while eliminating the ongoing MIP once you qualify conventionally. Discuss this refinancing strategy timeline with your lender.

Related Reading on RiederHomes.com:

→ Blog #11: FHA Loans San Diego

→ Blog #13: Private Mortgage Insurance

→ Blog #3: Types of Home Loans

→ Blog #4: Down Payment Requirements

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556