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Abstract Background Bone healing process includes four phases: inflammatory response, soft callus formation, hard callus development, and remodeling. Mechanobiological models have been used to investigate the role of various mechanical and biological factors on bone healing. However, the effects of initial healing phase, which includes the inflammatory stage, the granulation tissue formation, and the initial callus formation during the first few days post-fracture, are generally neglected in such studies. Methods In this study, we developed a finite-element-based model to simulate different levels of diffusion coefficient for mesenchymal stem cell (MSC) migration, Young’s modulus of granulation tissue, callus thickness and interfragmentary gap size to understand the modulatory effects of these initial phase parameters on bone healing. Results The results quantified how faster MSC migration, stiffer granulation tissue, thicker callus, and smaller interfragmentary gap enhanced healing to some extent. However, after a certain threshold, a state of saturation was reached for MSC migration rate, granulation tissue stiffness, and callus thickness. Therefore, a parametric study was performed to verify that the callus formed at the initial phase, in agreement with experimental observations, has an ideal range of geometry and material properties to have the most efficient healing time. Conclusions Findings from this paper quantified the effects of the initial healing phase on healing outcome to better understand the biological and mechanobiological mechanisms and their utilization in the design and optimization of treatment strategies. It is also demonstrated through a simulation that for fractures, where bone segments are in close proximity, callus development is not required. This finding is consistent with the concepts of primary and secondary bone healing.