Are there ways to avoid MIPs?

FHA loans are often seen as a good option for borrowers with less money saved up as these loans allow down payments as low as 3.5%. However, because of this, it’s impossible to avoid MIP on an FHA loan. If you have enough cash saved up to make a 20% down payment, applying for a conventional mortgage might be a better option for you. When you make a 20% down payment on a conventional loan, you won’t have to pay for mortgage insurance. Additionally, if you put less than 20% down on a conventional loan, you’ll be able to have PMI removed when you reach 20% equity in your home, which isn’t the case for MIP on FHA loans.

How long do MIP payments continue?

In some cases, you may be able to have MIP removed. However, many FHA borrowers will pay MIP for the life of their loans. If you made a down payment of 10% or more, you may be able to have MIP removed after 11 years of making payments. If you received your loan prior to June 3, 2013, you may qualify for cancellation if you’ve reached 22% equity in your home. If you have at least 20% equity in your home but aren’t eligible to have MIP removed, your best option may be to refinance into a conventional loan – as long as that makes sense for your current financial situation. When you refinance into a conventional loan and keep at least 20% equity in your home, you won’t be required to pay for mortgage insurance.

Is mortgage insurance required for other mortgage types, such as USDA or VA loans?

Neither United States Department of Agriculture (USDA) nor Department of Veterans Affairs (VA) loans require mortgage insurance. However, because each mortgage does allow for a low – or even no – down payment, additional costs and fees are set in place to protect lenders from the risk of borrowers defaulting on their loans.

Mortgage Insurance Premium (MIP): A Guide