FHA Mortgage Insurance Rates in 2025: What NC Homebuyers Need to Know (It’s Not PMI!) If you’re buying your first home in North Carolina — whether it’s in Raleigh, Fuquay-Varina, or a more rural area — there’s a good chance you’re looking into FHA loans. And if you are, you’ve probably heard about mortgage insurance.
But let’s clear up a common myth right away: FHA loans don’t come with PMI. They come with MIP, which stands for Mortgage Insurance Premium — and while it’s similar, it’s definitely not the same thing.
What’s the Difference Between PMI and MIP?
PMI (Private Mortgage Insurance) is required on most conventional loans when you put down less than 20%. It can usually be removed once you reach 20% equity. It’s handled by private companies.
Conventional Mortgage rates are what you most often see quoted in the news, and they are higher than those backed by the Government.
If you have a low Credit Score, it is often cheaper to get a FHA loan as opposed to a Conventional Loan. Not because of the Mortgage rate itself, but because PMI Rates on a 95% mortgage with scores under 680 are really super high – I’ve seen the premiums at $650 a month this year!
MIP (Mortgage Insurance Premium) is a government-backed fee required on all FHA loans — no matter how much you put down. And unless you put 10% down or more, you’ll pay MIP for the life of your loan (unless you refinance out of FHA). Even if you put 10% down, FHA Mortgage Insurance sticks around for 11 years.
FHA Mortgage insurance rates generally are .5% lower than Conventional Loans, unless you have low credit scores. Lower credit scores can definitely cause a FHA loan to have a Mortgage Interest rate higher than a Conventional Loan. However, because low credit scores do not impact the FHA Mortgage insurance rates, a FHA Loan will almost always have a lower overall payment for you if you have lower credit scores.
The thing to remember is that payments from the FHA Mortgage Insurance Rates go directly into the budget in Washington to reduce the deficit. It’s one of the only things that is going in as “free flow” cash to the budget, because we have so few houses going into foreclosure right now.
📌 FHA MIP Costs in 2025
Let’s break FHA Mortgage Insurance Rates down for 2025:
Just like in the past, FHA charges two types of MIP:
Upfront MIP:
This is a one-time charge of 1.75% of your loan amount, and it usually gets rolled into your loan.
Annual MIP (paid monthly):
This varies depending on your down payment and loan size. Here’s the breakdown:
✅ For loans under $726,200:
If you put 5% or more down: 0.50% annually
If you put less than 5% down: 0.55% annually
✅ For loans over $726,200:
The annual MIP is 0.70%, whether you put 5% or 10% down.
That means if you’re buying a $300,000 home in NC and putting the minimum down, your monthly MIP could add around $137 to your payment. Not bad when you consider you didn’t need 20% down!
🎉 FHA Lowered MIP Rates (Yes, Really!)
Here’s the good news: In January, FHA announced a MIP rate reduction — saving the average homebuyer nearly $4,000 over five years. It’s the biggest drop we’ve seen in a while, and the first time in years that FHA’s mortgage insurance got cheaper.
Rates are still bouncing around, but FHA-backed loans are an awesome option for folks who want flexibility with credit scores, income documentation, or down payment.
💡 Can I Remove FHA MIP Later?
Short answer: Maybe.
If you put 10% or more down, MIP automatically cancels after 11 years.
If you put less than 10% down, MIP sticks around for the life of the loan — unless you refinance into a conventional mortgage later.
We always help our clients keep an eye on when a refinance might make sense. If your credit has improved or home values have risen, it might be a great time to ditch MIP and lower your payment.
If the property you originally purchased with an FHA Loan is now Investment Property, you might be in luck! FHA Mortgage Loans are generally only available to folks who are going to live in the property – the EXCEPTION is if you already own the home, and you want to refinance it. If you purchased a home with a FHA mortgage, then moved out, and are renting it (so now it’s Investment property) you might be eligible for a Streamline Refinance.
🔁 What If I Already Have an FHA Loan?
You might be in an even better spot. With FHA’s Streamline Refinance, you could lower your payment and potentially skip the appraisal, income verification, or even credit score check!
To qualify for the streamline refinance:
- Your current loan must be an FHA loan.
- You must be current on payments and made at least 6 payments.
- The new loan must result in at least a 5% lower monthly payment.
If you took out your FHA loan in the last 3 years, you might even get a refund of part of your original upfront FHA Mortgage Insurance Rates!
🏡 Is FHA Right for You?
For many North Carolina buyers — especially first-time home buyers — FHA can be the easiest path to homeownership. You don’t need perfect credit or a big savings account. And we can even pair your FHA loan with down payment assistance or grants if you qualify.
From Apex to Wilmington to Asheville, we’re helping folks every day figure out what works best for their budget and future goals.
Give us a shout — we’ll help you figure out whether FHA, USDA, VA, or conventional makes the most sense. We’ll also run the numbers to show how much FHA Mortgage Insurance Rates (or PMI) could really impact your monthly payment, and whether a refinance might put money back in your pocket. Call Steve and Eleanor Thorne at 919-649-5058 — or shoot us an email. We’re always here to help North Carolina families make smart, confident choices in today’s market.
I try and answer all questions :)