Finance
What is 'mortgage insurance premium' (MIP) on an FHA loan versus PMI on a conventional loan?
AA. They are identical; both protect the lender in case of default
BB. MIP is required for the life of most FHA loans (with less than 10% down); PMI on conventional loans can be cancelled when the borrower reaches 20% equity✓ Correct
CC. MIP is higher than PMI on comparable loan amounts
DD. PMI protects the borrower; MIP protects the FHA fund
Explanation
Both MIP and PMI protect the lender/insurer against borrower default, but differ in structure. FHA MIP includes an upfront premium (1.
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