Finance
What is 'mortgage insurance premium' (MIP) on an FHA loan and how does it differ from PMI?
AMIP and PMI are identical; the term depends on the lender
BMIP is required on FHA loans, paid upfront and annually; PMI is on conventional loans and can be cancelled at 80% LTV✓ Correct
CMIP is required by Illinois law; PMI is a federal requirement
DMIP is paid by the seller; PMI is paid by the buyer
Explanation
FHA MIP consists of an upfront MIP (1.75% of the loan amount, added to the loan) and annual MIP (paid monthly). Unlike PMI on conventional loans, FHA MIP cannot be cancelled for most FHA loans originated after 2013 regardless of equity—it typically lasts the life of the loan unless the borrower refinances into a conventional loan. This is an important consideration for FHA borrowers in Illinois.
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