PMI vs. FHA Mortgage Insurance (MIP)
Conventional PMI costs more with weaker credit but comes off at 20% equity; FHA MIP ignores your credit score but can last the life of the loan.
If your credit is strong and you can put down 3% to 10%, conventional PMI is usually cheaper over time because it ends once you reach 20% equity, as explained in our California private mortgage insurance guide. If your credit score is lower, FHA can be cheaper at the start, but with less than 10% down its annual MIP lasts for the life of the loan unless you refinance. California buyers can narrow the gap with CalHFA assistance. Lender-required insurance is one part of a bigger compliance picture; see our state compliance guide and estimate your homeowners premium with the Homeowners Insurance Calculator.
| Key Dimension | Conventional PMI | FHA Mortgage Insurance Premium (MIP) |
|---|---|---|
| When It Applies | Conventional loans with less than 20% down. | Every FHA loan, regardless of down payment. |
| Why It Matters: Putting 20% down eliminates PMI entirely; no down payment eliminates FHA MIP. | ||
| Upfront Cost | Usually none with standard monthly PMI (single-premium options exist). | 1.75% of the loan amount, paid at closing or added to the loan. |
| Why It Matters: On a $500,000 FHA loan, the upfront premium alone is $8,750. | ||
| Ongoing Cost | Roughly $30 to $70 a month per $100,000 borrowed (Freddie Mac estimate), priced by credit score and down payment. | Annual premium most commonly around 0.55% of the loan, based on loan size, term and down payment, not credit score. |
| Why It Matters: Borrowers with strong credit often pay less with PMI; borrowers with weaker credit may pay less with FHA. | ||
| How It Ends | Request at 80% of original value; automatic at 78%; mandatory at the loan midpoint (Homeowners Protection Act). | Life of the loan with less than 10% down; 11 years with 10% or more down. |
| Why It Matters: This is the biggest long-term difference. FHA MIP with a small down payment ends only when you refinance or sell. | ||
| Early Removal | Many lenders allow removal based on a new appraisal if the home has appreciated. | Not available; refinancing into a conventional loan is the usual exit. |
| Why It Matters: In appreciating California markets, PMI can disappear years earlier than scheduled. | ||
| Who It Protects | The lender. | The lender (through FHA). |
| Why It Matters: Neither protects your family or the house. Homeowners insurance and life insurance do that. | ||
Use our open-source actuarial calculators to simulate deductibles, out-of-pocket exposure, and multi-policy trade-offs.
Frequently Asked Questions: PMI vs. FHA Mortgage Insurance (MIP)
Direct answers to trade-offs, actuarial differences, and decision criteria.