Mortgage Insurance: Know the PMI and FHA MIP Rules
Conventional PMI and FHA MIP follow different cost and duration rules. Identify the coverage on your loan before planning its removal.
Quick Facts: Two Different Insurance Paths
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Lender protection
Mortgage insurance covers credit risk.
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Conventional PMI
Payment forms and cancellation vary.
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FHA MIP
Case date and original LTV matter.
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Complete loan cost
Insurance is only one comparison item.
Identify the insurance on the loan
Mortgage insurance protects the lender against credit loss. It is different from homeowners insurance. Read the loan’s actual insurance type, premium form and duration.
Conventional PMI
Often required with less than 20% down on a conventional loan. Premiums and payment forms vary; PMI is not always a monthly-only charge.
FHA MIP
Most FHA programs collect an upfront premium and an annual premium in monthly installments. The actual rate and duration follow the program.
Conventional PMI: three milestones to understand
- 80% Request cancellation A written request, required payment history, no junior liens and evidence that value has not declined.
- Scheduled 78% Automatic termination Generally when the original schedule reaches 78% of original value, if payments are current.
- Midpoint Final termination Generally the following month when current, even if the balance has not reached 78%.
Illustrative original value $400,000
80% balance $320,000
Scheduled 78% balance $312,000
General HPA rules for covered borrower-paid PMI on single-family principal residences closed on or after July 29, 1999. Original value generally uses the lower purchase price or original appraisal; refinance rules differ. Lender-paid PMI and other loan types have different rules.
Appreciation-based removal follows investor and servicer requirements. It is not automatic; ask which valuation, seasoning and payment-history conditions apply.
