The two charges inside FHA insurance
FHA loans carry an upfront premium (1.75% of the loan amount, usually financed into the balance) and an annual MIP paid monthly. On post-2013 loans with the standard minimum down payment, that monthly MIP lasts for the life of the loan. Put 10%+ down and it drops after 11 years. Either way, FHA insurance is not the kind that cancels at 20% equity; that is conventional PMI's trick, not FHA's.
The escape routes
Route one: refinance to conventional. Once your equity reaches 20% (California appreciation often gets homeowners there startlingly fast), a rate-and-term refinance into a conventional loan removes mortgage insurance entirely. The math weighs closing costs against MIP savings, and the break-even is frequently under two years.
Route two: FHA streamline first, conventional later. When conventional rates are unfavorable but your FHA rate is high, an FHA streamline refinance (minimal documentation, no appraisal in many cases) can cut the rate now, with the conventional exit saved for when equity and rates align.
The honest framing
MIP is not a scandal; it is the price of 3.5%-down access that conventional would not have offered the same borrower. The mistake is not taking FHA; it is forgetting to leave when you have outgrown it. Jackie tracks client equity and calls when the exit math turns green.
Frequently asked questions
How much is FHA mortgage insurance monthly?
Annual MIP for most borrowers runs around half a percent of the loan balance per year, paid monthly: on a $600,000 California loan, roughly a few hundred dollars a month. Exact rates vary by loan size, term, and down payment.
Can I just pay my FHA loan down to 80% and cancel?
No; that is conventional PMI's rule. Modern minimum-down FHA loans keep MIP for the loan's life regardless of equity, which is exactly why the refinance exit exists.
What credit score do I need to refinance out of FHA?
Conventional refinancing generally wants 620+, with pricing improving up the tiers; see
rate and credit. If your score has grown since the FHA purchase, as it has for most, the exit usually prices better than people expect.
