FHA Loan Basics: Down Payment, Credit Score, and MIP

An FHA loan lets you buy with as little as 3.5% down, and in exchange you pay FHA mortgage insurance for 11 years if you put down 10% or more, or for up to 30 years (or the full loan term) if you put down less. The Federal Housing Administration is part of HUD and insures the loan. The numbers below are HUD's published rules as of October 2026.

1. The down payment and credit score rules

HUD says the borrower's minimum required investment is at least 3.5% of the property's adjusted value, which in a typical purchase works out to a 3.5% down payment. What you actually need depends on your credit score. HUD's rule for case numbers assigned before January 1, 2027 uses a "minimum decision credit score." When three scores are reported, the middle one counts. When two differ, the lower one counts. With multiple borrowers, the lowest borrower score is used.

Borrowers with no traditional credit history are still eligible for maximum financing, but the lender must underwrite the loan by hand. A 580 score meets HUD's minimum but does not by itself guarantee approval.

2. Two kinds of mortgage insurance premium

FHA charges two premiums on most purchase loans, both called MIP.

• Upfront MIP: 1.75% of the base loan amount, collected at closing.
• Annual MIP: collected in monthly installments with your payment. The rate depends on the loan term, the loan size, and your loan-to-value (LTV) ratio.

For case numbers endorsed on or after March 20, 2023, HUD lists these annual rates for loans with terms longer than 15 years:

For terms of 15 years or less and a base loan of $726,200 or less, the rate is 0.15% at 90% LTV or below and 0.40% above 90%.

3. How long the annual MIP lasts

This is the part that surprises buyers. For case numbers assigned on or after June 3, 2013, HUD collects annual MIP for the maximum duration its handbook allows:

• LTV above 90% at origination: until the end of the loan term or 30 years, whichever comes first.
• LTV of 90% or less at origination: until the end of the loan term or 11 years, whichever comes first.

HUD also states that borrowers may not request early cancellation of annual MIP by paying down principal. The premium length is fixed when the loan starts.

4. A worked example: $300,000 home

These figures are an illustration, not a quote. They use the rates above, a base loan under $726,200, and a term longer than 15 years. Annual MIP is shown as the first-year amount on the starting balance. HUD actually calculates it on the average balance each year, so real charges are slightly lower as the loan shrinks.

Putting down the extra $19,500 cuts the monthly premium by about $20 and changes the duration from up to 30 years to 11. Whether that trade makes sense depends on what else the cash would do for you, such as an emergency fund.

5. Loan limits for 2026

FHA sets maximum loan amounts by county. For calendar year 2026, HUD lists a one-unit "floor" of $541,287 in lower-cost areas and a "ceiling" of $1,249,125 in high-cost areas, with higher limits for two- to four-unit properties. HUD's Mortgagee Letter 2025-23 (December 11, 2025) makes them effective for case numbers assigned on or after January 1, 2026. Your county's exact limit is on HUD's mortgage limits lookup.

6. Key takeaways

• FHA minimum down payment is 3.5% with a 580 minimum decision score, or 10% with a score from 500 to 579.
• Upfront MIP is 1.75% of the base loan; annual MIP ranges from 0.15% to 0.75% depending on term, size, and LTV.
• Annual MIP runs 11 years only if LTV is 90% or less at origination; otherwise it can last 30 years or the full term.
• Paying extra principal does not cancel annual MIP early.
• The 2026 one-unit FHA limit is $541,287 at the floor and $1,249,125 at the ceiling.