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PMI and MIP Explained

Mortgage insurance protects the lender when your down payment is small. Conventional loans use PMI; FHA loans use MIP. Each works differently.

Conventional PMI

PMI applies to conventional loans with less than 20% down. It is a monthly cost based on your loan size, credit, and down payment. It cancels automatically as your balance falls to about 78% of the original value, and you can request removal at 80%.

FHA MIP

FHA loans charge an upfront premium of 1.75% plus an annual premium paid monthly. With less than 10% down, MIP generally lasts the life of the loan, so many borrowers refinance into a conventional loan later to drop it.

How to avoid or remove it

• Put 20% down on a conventional loan to skip PMI entirely.
• Pay down to 80% loan-to-value and request PMI removal.
• Refinance an FHA loan to conventional once you have enough equity.

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Frequently asked questions

What is PMI?

Private mortgage insurance on conventional loans with under 20% down. It protects the lender and cancels as you build equity.

Does FHA have PMI?

FHA uses MIP, not PMI. It has an upfront and an annual premium, and it can last the life of the loan with a low down payment.

How do I get rid of mortgage insurance?

Reach 20% equity to cancel conventional PMI, or refinance an FHA loan to conventional.