![]() They also have an up-front mortgage insurance premium of 1.75% of the base loan amount. But FHA loans don’t just have monthly MIPs. There’s only one type of MIP, and the borrower always pays the premiums. You might choose one type of PMI over another if it would help you qualify for a larger mortgage or enjoy a lower monthly payment. ![]() The borrower pays indirectly through a higher interest rate or higher mortgage origination fee. The borrower pays part up front and part monthly. You’ll make one PMI payment up front or roll it into the mortgage. This is just what it sounds like-the borrower pays the insurance monthly typically as part of their mortgage payment. Related: FHA Mortgage Insurance: Who Needs It & How Much It Costs Types of Mortgage Insurance ![]() Note that conventional loan borrowers with lower down payments pay private mortgage insurance (PMI) while borrowers who get a loan backed by the Federal Housing Administration (FHA) pay a mortgage insurance premium (MIP). Both of these scenarios were seen during the 2007 housing crisis and recession, which highlighted the importance of mortgage insurance. Lenders traditionally require a down payment of 20% as a condition of qualifying for a mortgage since a borrower who invests their own money in their home is less likely to give up on making payments and let the bank foreclose on the home if their home’s value drops or their personal finances deteriorate. While mortgage insurance is designed to protect the lender, this reduced risk allows lenders to offer loans to borrowers who otherwise wouldn’t qualify for a mortgage at all, let alone an affordable one. Mortgage insurance is a type of policy that protects a mortgage lender if a borrower fails to make their payments. ![]()
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