What changes when you put 10% down?
Two buyers consider the same $400,000 house with a 30-year fixed FHA mortgage at 6%. The appraisal matches the price. One would put 3.5% down and the other 10%. Both would finance the upfront premium.
| Purchase figures | 3.5% down | 10% down |
|---|---|---|
| Down payment | $14,000 | $40,000 |
| Base loan | $386,000 | $360,000 |
| Upfront premium | $6,755 | $6,300 |
| Annual premium rate | 0.55% | 0.50% |
| Monthly MIP in year one | $175.93 | $149.17 |
| Scheduled duration | 30 years | 11 years |
Putting another $26,000 into the house reduces the first-year monthly payment by $185.37 before taxes and homeowners insurance. Of that difference, $158.61 comes from borrowing less and $26.76 comes from the lower mortgage insurance charge.
The larger down payment also brings the base loan to exactly 90% of the home’s value. At that threshold the scheduled premium period falls to 11 years. A buyer expecting to move sooner can compare the premiums through the sale instead. See costs over your expected holding period.
What if you put 5% down instead?
On the same $400,000 example, a $20,000 down payment gives a $380,000 base loan, or 95% of the price. The annual rate falls to 0.50%, but premiums are still scheduled for the full 30-year term. The 5% and 10% options have the same annual rate here and different end dates.
For the extra $20,000 needed to move from 5% to 10% down, year-one mortgage insurance falls from $157.45 to $149.17 a month. That $8.28 difference matters differently to someone planning to sell in seven years than to someone who will still hold the loan in year 12.
Pay the upfront premium or finance it?
At 10% down, paying the $6,300 upfront premium in cash keeps the starting loan at $360,000. Financing it brings the starting loan to $366,300. In this example the first-year monthly MIP is $149.17 either way.
The difference appears on the principal-and-interest line. It is $2,158.38 a month with the premium paid in cash and $2,196.15 when financed. Keep that $37.77 monthly difference separate from the one-time $6,300 charge when comparing the offers.
How would a 15-year FHA loan change the payment?
Keep the $400,000 price, 10% down payment and financed premium. Compare a 15-year and 30-year loan at the same illustrative 6% rate so that only the term changes. Both start at $366,300.
| Payment component | 15 years | 30 years |
|---|---|---|
| Annual MIP rate | 0.15% | 0.50% |
| Monthly MIP | $44.13 | $149.17 |
| Principal and interest | $3,091.05 | $2,196.15 |
| Total before tax and escrow | $3,135.18 | $2,345.32 |
The shorter term saves $105.04 each month on mortgage insurance in year one, yet requires $789.86 more per month overall because you repay the principal faster. Both options have the same 11-year MIP period. For a real offer, run each term with the rate your lender quoted for it.
What if you sell and pay off the mortgage after seven years?
Suppose the buyers in the 30-year example make all 84 scheduled payments, then sell. Both loans still have monthly insurance at that point. For this decision, compare the full upfront charge plus the monthly premiums billed through year seven.
| Insurance charge | 3.5% down | 10% down |
|---|---|---|
| Upfront premium | $6,755 | $6,300 |
| 84 monthly charges | $14,154 | $12,000.60 |
| Total premiums | $20,909 | $18,300.60 |
The 10% option reduces the seven-year insurance charges by $2,608.40. The extra $26,000 down becomes equity in the house; it also leaves the buyer with less cash at closing. The table tracks insurance charges alone. Financing the upfront premium also adds loan interest, which belongs in a comparison of total borrowing costs.
Where do these numbers appear on my Loan Estimate?
- Page 1, Loan Terms
- Match the loan type, term and note rate first. In the 10%-down financed example, the form’s loan amount would be $366,300 because it includes the $360,000 base loan and the $6,300 premium. Use the base loan when checking the upfront charge so you count that premium only once.
- Page 1, Projected Payments
- Look for $2,196.15 in monthly principal and interest and $149.17 in first-year mortgage insurance. If the offer also collects $410 a month for property taxes and homeowners insurance through escrow, the illustrated total is $2,755.32. If an expense is billed separately, allow for it in your household budget.
- Page 2, Closing Cost Details
- Look for the upfront FHA premium under Services You Cannot Shop For. A listed charge can be financed. Ask which part is included in the loan amount, then check Calculating Cash to Close for the funds due after your deposit, credits and other closing costs. Walk through the CFPB’s sample Loan Estimate.
What if the home appraises below the sale price?
Suppose the contract price stays at $400,000, but the lender confirms an FHA adjusted value of $390,000. Borrowing $360,000 before the upfront premium gives a loan-to-value ratio of 92.31%, even though $40,000 is 10% of the sale price. The 30-year loan in this example falls above the 90% threshold for an 11-year premium period.
To reach 90% of that adjusted value, the base loan would need to be $351,000. At the same price, the buyer would have to contribute $49,000 toward the purchase before other closing costs. This calculator assumes price equals adjusted value, so use the base loan and adjusted value confirmed by the lender for this check. HUD’s definition of adjusted value for a purchase.
Can paying down principal end FHA mortgage insurance early?
For a new purchase modeled here, the original loan-to-value ratio and original term set the scheduled period. If you start at 96.5% and later pay the balance below 90%, the extra payments alone do not switch that loan to the 11-year schedule. Paying the loan off in full ends future premiums on that loan.
For an existing mortgage, ask the servicer for the FHA case assignment date, original loan-to-value ratio and final monthly premium date. Cases assigned before June 3, 2013 can follow different cancellation rules. If the paperwork instead lists conventional private mortgage insurance, check the conventional PMI milestones. HUD guidance on scheduled premiums and early payoff.
How the FHA estimate is calculated
- Base loan and loan-to-value ratio
- Start with the purchase price less your chosen down payment and round the base loan down to whole dollars. This comparison assumes the FHA adjusted value equals that price. A lower appraisal or an adjustment for a seller incentive can change the basis. Use the lender’s figures when either applies.
- Upfront charge
- Multiply the base loan by 1.75%. Truncate any fraction of a cent. If you finance the premium, the resulting loan is expressed in whole dollars and any remaining cents are paid in cash.
- Monthly insurance and ownership period
- HUD selects an annual rate using the original base loan, loan-to-value ratio and term. The worksheet averages each year’s scheduled opening balances and adjusts for financed upfront MIP under HUD’s rounding rules. It sums each year’s monthly charges until the selected payoff year or the end of the premium period, whichever comes first, and counts the upfront premium once. HUD’s monthly premium calculation.
- Which purchases fit this worksheet?
- Use it for an ordinary 2026 one-unit, fixed-rate FHA purchase with a 15- or 30-year term under the premium schedule for endorsements on or after March 20, 2023. Check the base loan against the FHA limit in your county. Your lender confirms eligibility. Refinances, reverse mortgages, special Indian Lands and Hawaiian Home Lands programs, and existing loans with older charges need separate rules.
Where the rates come from
The examples use HUD’s premium schedule for new FHA loans, including the different rates for 15- and 30-year terms. The $726,200 dividing line in the rate table applies to the base loan. County loan limits determine how much may be insured in a location and are a separate check. Compare the FHA handbook’s premium tables (Appendix 1.0) with the letter establishing the effective date. Figures checked November 6, 2026.