What are PMI and MIP?
Both Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP) are types of insurance programs designed to protect the lender. Depending on the amount of your down payment and the type of loan you choose, you may or may not be required to pay this insurance. Every situation varies, so you’ll want to ask your lender for specific details. Generally speaking, PMI applies to conventional loans where the homebuyer pays a down payment of less than 20% of the purchasing cost. The MIP typically applies to loans backed by the Federal Housing Administration or the Veterans Administration. These are insurance premiums that are paid either as cash up front at settlement or as part of the monthly mortgage payment to protect the lender in the event of a default on the mortgage payments.
