Also written as:
MIP
The mortgage insurance required on FHA loans. Has both an upfront premium (1.75% of the loan, financed in) and a monthly premium that lasts most of the loan's life.
MIP is FHA's version of mortgage insurance. Unlike PMI on conventional loans, MIP has two parts: an upfront premium and an annual premium paid monthly.
Upfront MIP is 1.75% of the loan amount, due at closing. Most borrowers roll it into the loan balance rather than paying it cash.
Annual MIP is typically 0.55% of the loan balance for most modern FHA loans with at least 5% down on a 30-year term. It's collected monthly with your mortgage payment.
Here's the catch: on most FHA loans, MIP stays for the life of the loan — it doesn't fall off at 80% LTV like PMI does. The only way to get rid of it is to refinance into a conventional loan once you have 20% equity. That's a major reason buyers refinance from FHA to conventional once they qualify.
Example
On a $300K FHA loan: upfront MIP of $5,250 (1.75%) rolled into the loan. Monthly MIP of about $138 (0.55% annual / 12). MIP stays for the life of the loan unless you refinance to conventional.
Also known as
MIP, FHA mortgage insurance, FHA MIP, upfront mortgage insurance premium, UFMIP