The Difference Between PMI and MIP

Mortgage insurance has two purposes—protecting lenders from potential homebuyer defaults and to allow homebuyers to qualify for a mortgage without making a large downpayment.

Mortgage insurance premiums (MIP) are paid as part of the mortgage payment for a loan guaranteed by the government, specifically the Federal Housing Administration (FHA). MIP stays with the loan for its full term if it was originated after June 3, 2013, or if you put down less than 10%. If you put down 10% or more, MIP can be eliminated after 11 years.

Private mortgage insurance (PMI) is only required for loans not guaranteed by the government, such as conventional loans that meet the borrower qualification standards as outlined by Fannie Mae and Freddie Mac. These are government-sponsored entities that buy mortgages from banks to package into mortgage-backed securities for investment. By returning the mortgage money to the bank that paid it out, banks can lend to borrowers repeatedly. Once the homeowner’s equity surpasses 20% to 22%, through making monthly and extra payments and market appreciation, they can petition the loan servicer to remove the PMI.

Lake Sidney Lanier Homes is the most comprehensive online source for information on Lake Lanier homes for sale and Lake Lanier area real estate. View the latest Lake Lanier home listings, foreclosures, lots, land, sales trends, and real estate topics on Lake Lanier. Arthur Prescott is an Accredited Buyer's Representative and Certified Residential Specialist with Berkshire Hathaway HomeServices Georgia Properties. He has over twenty years of Lake Lanier real estate experience. If you would like to schedule a free buyer or seller consultation, please contact us at www.LakeSidneyLanierHomes.com or 770-844-8484 or email us at Arthur.Prescott@BHHSGeorgia.com.