Finance
Mortgage insurance premium (MIP) on FHA loans differs from conventional PMI in that:
AMIP is paid only upfront; PMI is paid monthly
BFHA MIP includes both an upfront premium and annual monthly premiums; conventional PMI is only a monthly premium✓ Correct
CMIP is lower than PMI in all cases
DMIP protects the borrower; PMI protects the lender
Explanation
FHA MIP includes an upfront MIP (UFMIP) paid at closing (or rolled into the loan) plus annual MIP paid monthly. Conventional PMI is typically only a monthly premium with no upfront component.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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