PMI vs. MIP – What’s the Difference?

It’s no secret that purchasing a home, especially for the very first time, can feel overwhelming and intimidating. With all of the mortgage and real estate lingo, and the sometimes-overwhelming processes and procedures, it’s no wonder buyers often find themselves confused and with lots of questions. One of the most common ones we hear is, “What is mortgage insurance, and why do I need it?”

What is Mortgage Insurance

Mortgage insurance is typically required of home buyers when their down payments are less than 20 percent for their home loans. Note that mortgage insurance is designed to help protect lenders and guarantee agencies when borrowers don’t have enough equity in their homes, and is not intended to protect the borrowers. There are two types of mortgage insurance – PMI & MIP.

PMI & MIP

Although the concept of insurance protection is similar, there are distinct differences between private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP) that should be considered when deciding which loan program best suits your financial needs.

PMI, provided by private companies, is typically available in a variety of premium plans and offers payment options that can usually be tailored to the borrower’s needs. There are a number of private mortgage insurance providers and each structure their offerings a bit differently.

MIP is the government-administered mortgage insurance program for the FHA. Since FHA loans offer reduced down payment options, MIP is required to offset the risk of borrowers defaulting on their loans.

Major Differences Between MIP & PMI

Major differences between these insurance programs include:

  • No upfront mortgage premium required with PMI, while an upfront MIP is required
  • Cancellation
    • PMI can be canceled after a stated LTV (loan-to-value) is achieved and favorable payment history has been established
    • MIP is paid for the life of the loan regardless of LTV. In order to remove MIP, borrowers must refinance their FHA mortgage loans, and meet minimum down payment and credit requirements

Contact an Inlanta Mortgage loan professional to discuss your options and ensure that you select the program that is right for you! Click here to find a licensed mortgage loan professional near you or apply online today.

What is Private Mortgage Insurance or PMI?

Mortgage-Insurance

What is Private Mortgage Insurance or PMI?

Private Mortgage Insurance (PMI) is a policy provided by private mortgage insurers to protect lenders against loss if a borrower defaults. The benefit of private mortgage insurance to the borrower is that it allows a borrower to purchase a home without putting down a 20% down payment.

PMI should not be mistaken for MIP, or Mortgage Insurance Premiums, purchased from the government for FHA mortgage loans.

What’s the Difference Between MIP & PMI?

Although the concept of insurance protection is similar, there are distinct differences between private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP) that should be considered when deciding which loan program suits your financial needs.

PMI is typically is available in a variety of premium plan structures and offers payment options that can usually be tailored to the borrower’s needs. There are a number of private mortgage insurance providers and each structure their offerings a bit differently.

MIP is the government-administered mortgage insurance program that has certain restrictions and has undergone a number of changes recently.

Major Differences Between PMI & MIP

Major differences between these insurance programs include:

  • Only a monthly premium is required with PMI while MIP requires both an upfront MIP (UFMIP) and a monthly premium.
  • PMI can be canceled after a stated LTV is achieved and favorable payment history has been established, while MIP is paid for the life of the loan.

For More Information

Contact an Inlanta Mortgage loan professional to discuss your options and ensure that you select the program that is right for you! Click here to find a licensed mortgage loan professional near you.

About Inlanta Mortgage

Inlanta Mortgage is proudly celebrating twenty years in business. Check out our 20th Anniversary Video.

Inlanta Mortgage provides its branches with Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is an agency approved lender for Fannie Mae, FHA/VA, FHA 203K and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs.

Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS #1016. Inlanta Mortgage was recently recognized as one of the Fastest Growing Firms in the Milwaukee-Area, is proud to be named to the Scotsman Guide Top Mortgage Lenders 2012 list and to be among the Top 100 Mortgage Banking Companies in America in 2012.

What is PMI?

 

What is PMI?

What is PMI?

If you are embarking on a new home buying adventure – you will soon encounter the term “PMI.” So, what is PMI?

PMI stands for private mortgage insurance. PMI is required of buyers who put down less than 20 percent on their home loan – which is usually the case for most home buyers.

What is the point of PMI? While home owners’ insurance protects your investment, private mortgage insurance protects lenders’ investments and encourages and enables lenders to help more first time home buyers. Essentially, if PMI didn’t exist, lenders would require a higher down payment to mitigate the inherent risk in lending to first time home buyers. Many of us, especially first time home buyers, are not in a position to put down a 20% down payment.

PMI is available in a variety of premium plan structures and offers payment options that can usually be tailored to the borrower’s needs. There are a number of private mortgage insurance providers and each structure their offerings a bit differently. PMI can be canceled after a stated LTV achieved and favorable payment history has been established.

As a quick note, don’t confuse monthly insurance premiums (MIP) for PMI. MIP is the government-administered mortgage insurance program for the FHA that has certain restrictions and has undergone a number of changes recently. Read more about MIP, FHA Mortgages & FHA Streamline Refinancing.

Are you a first time home buyer with more questions about the home buying process and what loan programs are available to meet your home financing needs? Contact a licensed mortgage loan professional near for more information.

Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs here.

Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS# 1016. Inlanta Mortgage is proud to be a recent recipient of a 2012 Top Workplace Award.

PMI & MIP – What’s the Difference?

Make Informed Decisions - Know the Difference Between PMI & MIP

Revised April 24, 2015

What is Mortgage Insurance

Mortgage insurance is a payment required of home buyers who have limited down payments for home loans. Mortgage insurance is designed to offset the borrower default risk for lenders and guaranteeing agencies that loan large amounts of money to borrowers with very little “skin in the game”. There are two types of mortgage insurance – MIP & PMI.

PMI & MIP

Although the concept of insurance protection is similar, there are distinct differences between private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP) that should be considered when deciding which loan program suits your financial needs.

PMI is private mortgage insurance that typically is available in a variety of premium plan structures and offers payment options that can usually be tailored to the borrower’s needs. There are a number of private mortgage insurance providers and each structure their offerings a bit differently. Read more about PMI here.

MIP is the government-administered mortgage insurance program for the FHA. Since FHA loans offer reduced down payment options, MIP is required to offset the risk of a borrower defaulting.

Major Differences Between MIP & PMI

Major differences between these insurance programs include:

  • No upfront mortgage premium required with PMI while an upfront MIP is required.
  • PMI can be canceled after a stated LTV is achieved and favorable payment history has been established, while MIP is paid for the life of the loan regardless of LTV. In order to remove MIP, a borrower must refinance their FHA mortgage loan and meet minimum down payment and credit requirements.

Contact an Inlanta Mortgage loan professional to discuss your options and ensure that you select the program that is right for you! Click here to find a licensed mortgage loan professional near you  or apply online today.

Our Mission Statement

Our mission is to be the home financing partner that you trust to serve your family, friends and community. Through our family of dedicated mortgage professionals, our commitment is to deliver an exceptional experience. Our unwavering dedication to integrity, honesty and ethics is the foundation of all of our relationships.

About Inlanta Mortgage

Headquartered in Brookfield, Wisconsin, Inlanta Mortgage is a growing mortgage banking firm committed to quality mortgage lending, ethical operations and strong customer service.

Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is an agency approved lender for Freddie Mac and Fannie Mae, FHA/VA, FHA 203K and USDA. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs.

Inlanta Mortgage was recently named a Top Mortgage Lender in 2013 as well as 2012 by Scotsman Guide. Inlanta was also recently named a Top Workplace in 2014 as well as in 2012. Inlanta has also been named one of the “Top 100 Mortgage Companies in America” in 2011, 2012 and 2013 and one of the 50 Best Companies to Work For by Mortgage Executive Magazine.

Inlanta Mortgage, Inc. NMLS #1016.