Financing exam concept
PMI vs MIP: when mortgage insurance ends depends on the loan
A borrower reaches 20% equity and asks to stop paying mortgage insurance. The first question is which loan the borrower has. Conventional borrower-paid PMI and FHA MIP follow different rules. Even within PMI, requesting cancellation is different from reaching the automatic termination date.
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The short answer
PMI is private mortgage insurance used with certain conventional mortgages. FHA MIP is the premium for FHA mortgage insurance. Both protect the lender against insured default loss, even when the borrower pays. For ordinary Homeowners Protection Act covered borrower-paid PMI, remember three separate rules: request cancellation at 80% of original value when its conditions are met, automatic termination at the scheduled 78% date if current, and final termination after the amortization midpoint if current. FHA MIP uses HUD’s own premium and duration rules, not those PMI thresholds.
Reviewed October 26, 2026. PSI lists PMI at National IV.A.1, conventional loans at IV.B.1 and FHA, VA and USDA programs at IV.B.4. The whole Financing domain has 10 scored national broker questions, not ten questions on mortgage insurance. These original examples cover the stated standard cases, not every insurance contract, high-risk loan, older FHA case or a decision about an actual account.
Choose the program before the cancellation rule
- Identify what is insured. PMI covers the lender’s insured credit loss on a conventional loan. FHA insures an approved lender, with premiums supporting its insurance program. Neither is homeowners insurance, title insurance, job-loss payment protection or a promise to reimburse the borrower’s equity. Default can still lead to foreclosure.
- Check the PMI coverage and payer. The federal baseline discussed here concerns qualifying transactions closed on or after July 29, 1999, secured by a single-unit principal residence. Borrower-paid PMI is different from lender-paid coverage. High-risk classifications, other properties, older loans and more favorable investor standards need their actual rules. High LTV alone does not establish the statutory high-risk classification.
- For an 80% request, use original value. For a purchase, it is generally the lower of the contract sale price and appraisal at purchase; for a refinance, use the appraisal relied on to approve the refinance. Either scheduled amortization or actual payments can reach the 80% cancellation point. The borrower must make a written request, have the required good payment history, be current and satisfy applicable value-evidence and junior-lien certification requirements. Meeting all the statutory conditions makes cancellation required, not a favor.
- For automatic termination, use scheduled 78%. An ordinary covered loan ends borrower-paid PMI at the statutory scheduled 78% date if the borrower is current. Extra principal that reaches an actual 78% early does not move that automatic date under the federal baseline, though it can support an earlier 80% request. The request-only good-history, value and junior-lien conditions are not added to ordinary automatic termination.
- Check time and modifications separately. If PMI has not ended sooner, covered final termination occurs on the first day of the month after the amortization midpoint if the borrower is current. Midpoint means halfway through the amortization period, not 50% LTV. An agreed loan modification requires recalculating the applicable cancellation, automatic-termination and final-termination dates. Do not blindly keep an old date after a modification.
- For FHA, distinguish the two premiums and two dates. Standard forward-loan upfront MIP is 1.75% of the base loan amount, with specified program exceptions. Annual MIP varies by term, base amount, original LTV and applicable policy. Mortgagee Letter 2023-05’s annual-rate table applies to endorsements on or after March 20, 2023. The post-2013 duration rule uses case numbers assigned on or after June 3, 2013. Those are different events.
- Apply the qualified FHA duration rule to base original LTV. For a standard 30-year forward case under that duration policy, original LTV of 90% or less means annual MIP for up to 11 years, ending sooner if the mortgage ends. Above 90%, it generally continues for the mortgage term. Exclude financed upfront MIP when testing that original-LTV duration threshold. Later appreciation or reaching conventional PMI thresholds does not by itself cancel this FHA premium.
- Compare the complete cost before calling any route cheaper. Borrower-paid PMI can be monthly, upfront or split; refunds depend on the policy and applicable law. Lender-paid insurance commonly carries a higher interest rate and does not use ordinary borrower-paid cancellation rights. Financing a premium adds to principal and financing cost. Paying off or refinancing an FHA loan can end the old loan’s MIP, but a new loan has its own approval, cost and insurance terms.
| Rule or charge | Relevant basis | Conditions that matter |
|---|---|---|
| PMI requested cancellation | 80% of original value, scheduled or actual payments | Covered borrower-paid loan; written request, good history, current, required value/lien conditions |
| PMI automatic termination | Scheduled 78% of original value | Ordinary covered case; current payments; not an early actual-balance trigger |
| PMI final termination | First day of month after amortization midpoint | Covered loan and current payments; recalculate after an agreed modification |
| Lender-paid PMI | Insurance paid by someone other than borrower | Ordinary borrower-paid cancellation sections do not apply; inspect rate and full cost |
| Standard FHA upfront MIP | 1.75% of base loan amount | Applicable forward program; specified exceptions and HUD collection precision |
| Qualified FHA annual duration | Original base LTV at or below 90% versus above 90% | Standard 30-year case assigned on or after June 3, 2013; up to 11 years versus term |
| FHA annual rate | Term, base amount, LTV and applicable table | Do not make 0.55% universal or substitute a current loan limit for the table threshold |
| VA and USDA | Their separate guaranty programs | VA has no PMI or MIP; USDA guarantee fees are not FHA MIP |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Insurance cost and insured protection | The borrower can pay a charge for coverage that protects the lender’s insured credit risk. | Who receives the insured loss protection? |
| PMI and FHA MIP | Private conventional-loan insurance and FHA insurance premiums have different governing rules. | Name the loan program first. |
| 80% request and scheduled 78% termination | The request route has additional conditions; ordinary automatic termination depends on its scheduled date and current payments. | Do not swap the trigger or import request-only conditions. |
| Current and good payment history | A loan can be current today yet fail the payment-history test for a requested cancellation. | Check the route before applying the lookback. |
| Original value and a new appraisal | A higher current estimate does not replace original value for the federal baseline calculation. | Investor current-value options are separate standards. |
| Actual balance and scheduled balance | Extra payments reduce actual principal early; scheduled automatic termination is a separate event. | An early actual 78% is not the automatic date. |
| Midpoint and loan modification | Midpoint is time in the amortization period. The statute requires recalculation after an agreed modification. | Neither 50% LTV nor an unchanged old date after modification. |
| FHA case assignment and endorsement | The stated duration and annual-rate policies use different date events. | June 3, 2013 case assignment; March 20, 2023 endorsement. |
| Base loan and financed total | The upfront premium can increase the financed amount without changing the base original-LTV duration test. | Do not push a base 90% case above 90% by adding financed UFMIP. |
| MIP termination and refinance approval | Ending the old loan does not approve a new one or establish savings. | Include qualification, costs, rate and any new insurance. |
Work through the facts
Find the original value before the threshold
Assume an ordinary covered borrower-paid PMI purchase loan. The contract price was $320,000 and the purchase appraisal was $300,000. A later appraisal is $400,000. The task is only to calculate the federal original-value thresholds, not approve cancellation.
- Original value is the lower purchase figure: $300,000.
- 80% × $300,000 = $240,000; 78% × $300,000 = $234,000.
- The later $400,000 appraisal does not replace that baseline.
Answer: $240,000 is the 80% balance and $234,000 the 78% balance. The actual cancellation route, dates and conditions still need checking.
Early actual 78% is not the automatic date
A current borrower makes extra principal payments on an ordinary covered borrower-paid PMI loan and reaches 78% of original value years before its scheduled 78% date. Assume no separate investor current-value rule or other favorable provision is supplied.
- Actual payments have passed the 80% threshold for a cancellation request.
- The scheduled automatic date has not arrived.
Answer: Use the written-request route and its remaining conditions for earlier cancellation. Do not treat early actual 78% as the federal automatic-termination date.
Current now, but a request has a history problem
A borrower’s loan is current and meets the 80% numerical test. A payment was 30 days past due eight months before the relevant statutory payment-history reference date. The question concerns the ordinary borrower-requested route, with no alternative favorable standard.
- The last twelve months must satisfy the statute’s no-30-days-or-more-late condition.
- Current status alone does not erase that specified history.
Answer: The supplied late payment prevents satisfying that good-history requirement for this request. Do not add the same history condition to ordinary scheduled automatic termination.
Automatic termination does not import request-only conditions
Assume a covered, unmodified, non-high-risk borrower-paid PMI loan at its scheduled 78% date. The borrower is current. There is a junior lien and the property’s current value has declined. No other exception applies.
- The stated ordinary automatic route requires the scheduled date and current status.
- The request-only value and junior-lien conditions are not additional requirements for that route.
Answer: Those two facts do not defeat the supplied automatic termination merely because they could matter to an 80% request.
Brought current after the scheduled date
An ordinary covered borrower-paid PMI loan reaches its scheduled termination date on October 1, 2026, while the borrower is not current. Payments bring it current October 20, 2026. No other exception applies.
- The statute uses the first day of the first month after the borrower becomes current.
- That is November 1, 2026.
Answer: Automatic termination follows November 1 on these facts, not an invented requirement to reach a new 80% threshold.
A midpoint is time, not half the property’s value
The stipulated midpoint of an unmodified, covered mortgage’s amortization period is October 15, 2026. The borrower is current, borrower-paid PMI has not ended earlier and no other exclusion applies.
- Final termination is on the first day of the month immediately after the midpoint.
- The specified calendar result is November 1, 2026.
Answer: Use November 1. A 30-year amortization midpoint is after 15 years, not when the balance reaches 50% of value. An agreed modification requires recalculating the applicable dates.
Finance the upfront FHA premium once
Assume a standard FHA forward case subject to a 1.75% upfront premium. Its base loan is $280,000, and the entire upfront premium will be financed. No other financed amount is included.
- UFMIP = $280,000 × 0.0175 = $4,900.
- Financed total = $280,000 + $4,900 = $284,900.
Answer: The premium is $4,900 and the stated financed total $284,900. Do not calculate the premium again on the already increased total or call it a monthly annual-MIP payment.
Exactly 90% remains in the qualified eleven-year category
Assume a standard 30-year FHA forward purchase case assigned on or after June 3, 2013, with no special exception. The lower purchase-price/appraisal figure is $300,000 and the base loan is $270,000. Standard upfront MIP is financed in full.
- Original duration-test LTV = $270,000 ÷ $300,000 = 90%.
- UFMIP = $270,000 × 0.0175 = $4,725; financed total = $274,725.
- Exclude that financed upfront premium from the original-LTV duration test.
Answer: Annual MIP is in the up-to-eleven-year category, ending sooner if the loan ends. Using $274,725 ÷ $300,000 to move this case above 90% would apply the wrong duration-test numerator.
A higher original FHA LTV has a different duration
Assume a standard 30-year FHA forward purchase case assigned on or after June 3, 2013, with no special exception. Its original duration-test value is $300,000 and its base loan is $289,500. Later appreciation creates 20% current equity, but the loan is not paid off or otherwise terminated.
- Base original LTV = $289,500 ÷ $300,000 = 96.5%, above 90%.
- The supplied standard case is in the mortgage-term annual-MIP duration category.
- Later current equity does not turn this FHA loan into a covered conventional borrower-paid PMI loan.
Answer: The appreciation alone does not cancel annual MIP. Check the actual FHA policy and loan; refinancing, if proposed, is a separate approval and cost decision.
Drop the fractional cent in FHA upfront collection
Assume a standard FHA forward case with a $279,850 base loan and 1.75% upfront MIP. The question asks for the UFMIP amount collected under HUD’s stated precision instruction, not an annual-MIP monthly installment.
- $279,850 × 0.0175 = $4,897.375.
- HUD’s upfront collection instruction says not to round; drop the fraction of a cent.
- The collected UFMIP is $4,897.37, not $4,897.38.
Answer: Use $4,897.37 for this upfront-premium collection. Do not apply that instruction indiscriminately to other charges or to the separate monthly annual-MIP calculation.
Mistakes to avoid
- The borrower pays, so PMI reimburses the borrower’s lost equity. The insured protection is against the lender’s covered default loss; foreclosure can still occur.
- Every mortgage insurance charge follows 80, 78 and midpoint. Check program, coverage and payer first. FHA MIP and lender-paid PMI are different.
- 20% current equity automatically removes PMI. Separate original-value requested cancellation, scheduled termination and any more favorable investor current-value standards.
- An early actual 78% balance is the automatic date. Extra payments can support the request route; the baseline automatic trigger is scheduled.
- A junior lien prevents every form of PMI termination. It can matter to the requested route; do not add its conditions to ordinary scheduled automatic termination.
- High LTV by itself proves a statutory high-risk exception. Actual risk classification and applicable provisions must be established; final midpoint rules still matter.
- FHA insurance protects only the insurance fund. FHA insures the lender’s covered risk; premiums fund the program.
- Every FHA annual premium is 0.55%. Term, base amount, LTV, program and applicable policy determine the rate.
- June 2013 and March 2023 use the same date event. Duration uses the specified case-assignment policy; the cited annual-rate table uses endorsement.
- A new refinance is a free guaranteed escape from insurance. A new loan requires approval and has its own costs, rate and insurance terms.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. Who receives the insured default-loss protection from ordinary private mortgage insurance?
- The home inspector
- The borrower’s employer
- The borrower’s furniture owner
- The lender or its insured credit interest
Show answer and explanation
Answer: D. The lender or its insured credit interest
The borrower can pay for insurance that protects the lender’s insured credit risk. It does not erase the borrower’s obligations or prevent foreclosure.
2. Which program uses FHA mortgage insurance premiums?
- Every VA-backed purchase loan
- An FHA-insured mortgage
- A conventional loan solely because it has a small down payment
- Every title-insurance policy
Show answer and explanation
Answer: B. An FHA-insured mortgage
FHA MIP belongs to FHA insurance. Conventional PMI, VA guaranty costs and title insurance are separate products or programs.
3. For a qualifying purchase loan, the contract price was $320,000 and original appraisal $300,000. What original value is used for the federal PMI baseline?
- Any later higher appraisal
- $620,000
- $320,000
- $300,000
Show answer and explanation
Answer: D. $300,000
For the stated purchase, use the lower contract price and purchase appraisal. Refinance original value has a different specified appraisal basis.
4. On $300,000 of original value, what is the 80% balance?
- $234,000
- $300,000
- $60,000
- $240,000
Show answer and explanation
Answer: D. $240,000
$300,000 × 0.80 = $240,000. Reaching the numerical threshold alone does not satisfy every requested-cancellation condition.
5. On $300,000 of original value, what scheduled balance corresponds to 78%?
- $240,000
- $66,000
- $234,000
- $390,000
Show answer and explanation
Answer: C. $234,000
$300,000 × 0.78 = $234,000. In the ordinary automatic route, use the scheduled date and current-payment condition, not simply an early actual balance.
6. Which is a condition of the ordinary borrower-requested PMI cancellation route?
- A new appraisal that always replaces original value
- An automatic right under every FHA loan
- A written request and the statutory payment, value and lien conditions
- Only reaching 50% current LTV
Show answer and explanation
Answer: C. A written request and the statutory payment, value and lien conditions
The 80% request has specified additional conditions. When all applicable statutory conditions are met, cancellation is required; the request is not merely discretionary.
7. Extra payments reach an actual 78% early on an ordinary covered borrower-paid loan. Does that fact alone establish the statutory scheduled automatic date has arrived?
- No; it can support the earlier requested-cancellation route
- Yes, even when the loan is not covered
- Yes, including FHA MIP
- Yes, always
Show answer and explanation
Answer: A. No; it can support the earlier requested-cancellation route
The automatic route uses its scheduled 78% date. Actual payments can reach the 80% cancellation threshold before schedule, subject to the request’s remaining requirements.
8. At scheduled 78%, a covered unmodified non-high-risk borrower-paid loan is current. Can request-only junior-lien or nondecline conditions simply be added to defeat ordinary automatic termination?
- Yes, because a new appraisal is always mandatory
- No
- Yes, because current means no lien
- Yes, in every case
Show answer and explanation
Answer: B. No
The supplied ordinary automatic route has its scheduled-date and current-status conditions. Do not import the additional requirements from the borrower-requested route.
9. A borrower is current today but had a 30-days-past-due payment eight months before the relevant good-history reference date. For the ordinary requested route, does being current alone cure that history issue?
- Yes, if the loan is FHA
- Yes, if current value rose
- No
- Yes, always
Show answer and explanation
Answer: C. No
Current status and the statutory good-payment-history test are distinct. The stated recent 30-day delinquency fails the relevant twelve-month history condition.
10. An ordinary covered loan is not current at its scheduled termination date but becomes current October 20, 2026. With no other exception, when does termination follow?
- Only at a new 80% request date
- October 20 automatically at that minute
- November 1, 2026
- December 31, 2026 in every case
Show answer and explanation
Answer: C. November 1, 2026
Section 4902(b) uses the first day of the first month after the borrower becomes current: November 1 on the stipulated facts.
11. What does midpoint final termination refer to?
- Halfway through the amortization period, with the applicable current-status and timing rules
- A guaranteed refinance approval
- Half the annual PMI rate
- A balance of 50% of today’s value
Show answer and explanation
Answer: A. Halfway through the amortization period, with the applicable current-status and timing rules
It is a time-based rule, not 50% LTV. The applicable final-termination date must be recalculated after an agreed modification.
12. What happens to applicable PMI cancellation and termination dates after an agreed loan modification under the statute?
- The mortgage automatically becomes FHA
- They always stay unchanged
- They must be recalculated to reflect the modified terms
- Only the insurance company can ignore them
Show answer and explanation
Answer: C. They must be recalculated to reflect the modified terms
Section 4902(d) addresses recalculation. Do not mechanically retain the original 15-year midpoint after a modification changes the applicable amortization terms.
13. At a standard 1.75% FHA upfront premium on a $280,000 base loan, what is UFMIP?
- $4,985.75
- $4,900
- $280,000
- $49,000
Show answer and explanation
Answer: B. $4,900
$280,000 × 0.0175 = $4,900. If that entire premium and nothing else is financed, the stated total is $284,900.
14. A qualified standard 30-year FHA case has a $270,000 base loan and $300,000 original duration-test value. Financed UFMIP raises total principal. Which duration category uses the correct base LTV?
- 90% or less: up to 11 years, ending sooner if the mortgage ends
- Automatic conventional PMI cancellation at 78%
- No annual MIP under every program
- Over 90% solely because UFMIP is financed
Show answer and explanation
Answer: A. 90% or less: up to 11 years, ending sooner if the mortgage ends
The original-LTV duration calculation excludes financed UFMIP. $270,000 ÷ $300,000 is exactly 90%; the supplied standard post-June-2013 case falls in the qualified eleven-year category.
15. Under the qualified standard post-June-2013 FHA duration rule, which event alone cancels annual MIP on an original 96.5% LTV case?
- Reaching conventional scheduled 78%
- Later appreciation to 20% current equity
- A new online value estimate
- Neither of those events alone
Show answer and explanation
Answer: D. Neither of those events alone
Do not import HPA borrower-paid PMI thresholds into FHA MIP. The stated standard case is generally in the mortgage-term duration category.
16. Which statement about lender-paid PMI is correct?
- Its higher rate is automatically reduced at 78%
- No separate charge means insurance has no cost
- Its ordinary borrower-paid cancellation sections do not apply; compare the rate and full cost
- It always cancels under the ordinary borrower-paid 80% rule
Show answer and explanation
Answer: C. Its ordinary borrower-paid cancellation sections do not apply; compare the rate and full cost
Section 4905 treats lender-paid insurance separately. It commonly carries a higher interest rate; payoff, refinancing or other termination of the loan is different from deleting a monthly borrower-paid PMI line.
17. A standard FHA base loan is $279,850 with 1.75% upfront MIP. Under HUD’s upfront collection instruction to drop a fraction of a cent rather than round, what is collected?
- $48,973.75
- $4,897.38
- $4,897.375
- $4,897.37
Show answer and explanation
Answer: D. $4,897.37
The product is $4,897.375. Dropping the fractional cent gives $4,897.37. This is the upfront collection rule, not a universal rounding instruction for every mortgage charge.
18. A standard post-June-2013 30-year FHA case has a $289,500 base loan and $300,000 original duration-test value. Which annual-MIP duration category fits, with no special exception?
- Eleven years because every FHA borrower qualifies
- Mortgage term, because base original LTV is 96.5%
- Cancellation merely from later appreciation
- Automatic termination at conventional scheduled 78%
Show answer and explanation
Answer: B. Mortgage term, because base original LTV is 96.5%
$289,500 ÷ $300,000 = 96.5%, above 90%. Under the supplied standard case’s policy, annual MIP generally continues for the mortgage term; the conventional HPA thresholds do not control FHA MIP.
19. After applicable borrower-paid PMI cancellation or termination, which premium return does 12 U.S.C. 4902(f) address?
- An automatic refund of every FHA upfront premium
- Every premium paid since closing, regardless of earned coverage
- All interest already paid on the mortgage
- Unearned PMI premiums, within the specified 45-day borrower-return period
Show answer and explanation
Answer: D. Unearned PMI premiums, within the specified 45-day borrower-return period
The statute addresses unearned PMI premiums, not a refund of all previously earned coverage. Its borrower-return deadline is no later than 45 days after the specified cancellation or termination. FHA refunds use separate program rules, and accrued obligations are not erased.
20. A covered high-risk borrower-paid PMI loan falls within a statutory exception to ordinary 80% cancellation and 78% termination. What should still be checked?
- Whether high LTV alone conclusively established high-risk status
- The applicable final midpoint-termination rule and current status
- Whether FHA’s 90% rule replaces the statute
- An automatic exemption from every HPA provision
Show answer and explanation
Answer: B. The applicable final midpoint-termination rule and current status
Section 4902(g)(2) preserves subsection (c)’s final-termination rule for covered high-risk mortgages. Do not infer the legal high-risk classification from high LTV alone or invent a universal 77% rule for every loan.
Common questions
What is the difference between PMI and FHA MIP?
PMI is private mortgage insurance associated with certain conventional mortgages. MIP is the premium for FHA mortgage insurance. Both concern the lender’s covered credit risk; neither is homeowners or title insurance. Their cancellation, duration, rates and refund rules are not interchangeable.
Does mortgage insurance protect the borrower?
It can help a borrower obtain financing under a program, but the insured default-loss protection is for the lender’s credit risk. It is not a policy promising to preserve your equity, replace wages, repair storm damage or pay off the mortgage after death. Paying PMI or MIP does not remove the repayment obligation or prevent foreclosure.
When can I request cancellation of borrower-paid PMI?
For an ordinary covered loan, the 80% point can be reached on schedule or early through actual payments. Make the required written request, meet the statutory good-history and current-payment tests, and satisfy the holder’s applicable no-decline value evidence and junior-lien certification requirements. When all the applicable statutory conditions are met, cancellation is required. Other investor standards may offer more favorable options; they do not make every loan eligible on the same terms.
What counts as original value for PMI?
For the purchase baseline, use the lower contract sale price and appraisal at purchase. For a refinance, it is the appraisal relied on to approve the refinance. A later higher appraisal does not automatically substitute for that value under the federal original-value rules. Current-value cancellation under an investor’s rules is a separate question.
Does PMI automatically end at 20% equity?
Not simply from that phrase. The ordinary requested route uses 80% of original value and additional conditions. Automatic termination uses the scheduled 78% date and current status. Extra payments, appreciation, occupancy, coverage and the payer can change which route needs checking. Do not equate 20% of a current estimate with every federal cancellation requirement.
Do extra principal payments move the automatic PMI termination date?
Under the ordinary federal baseline, actual extra payments can qualify the borrower for the earlier requested route at 80% of original value, subject to its conditions. They do not by themselves replace the scheduled 78% automatic date. More favorable investor or loan provisions require their own review.
Does being current satisfy the PMI good-history test?
Current today is separate from the payment-history lookback for an 80% request. The statute anchors that lookback to the later of the cancellation date and the request date. It requires no payment 60 days or more past due in the twelve-month period beginning 24 months before that date, and no payment 30 days or more past due in the twelve months immediately before it. Do not add that request-only test to ordinary scheduled automatic termination.
When is the midpoint rule relevant, and what if the loan was modified?
If covered borrower-paid PMI has not ended sooner, final termination is on the first day of the month after the amortization midpoint if the borrower is current. Halfway through an unmodified 30-year amortization period means 15 years, not 50% LTV. The statute requires recalculation of the relevant dates after an agreed modification, so the old original date is not a safe shortcut.
Does the same 80% and 78% rule apply to every property or insurance arrangement?
No. The statutory residential transaction and mortgage definitions, transaction date, one-unit principal-residence requirement, payer and actual risk classification matter. A first-lien-only assumption is also too broad: the CFPB examination guidance identifies qualifying junior mortgages as covered. High-risk exceptions to ordinary 80% and 78% rules do not erase the covered midpoint rule. Lender-paid insurance has its separate statutory treatment.
What is the current standard FHA upfront MIP rate?
For the standard forward-loan cases described here, UFMIP is 1.75% of the base loan amount. HUD specifies exceptions, including certain older-loan refinance and special program cases. Financing the charge adds it to principal; it does not turn the premium into free money or make that increased total the starting base for another UFMIP calculation.
How long does annual FHA MIP last?
For a standard 30-year forward case assigned on or after June 3, 2013, base original LTV of 90% or less generally means up to 11 years, ending sooner if the mortgage ends; above 90% generally means the mortgage term. Exclude financed UFMIP from that original-LTV duration test. Older cases, special programs and modified terms need their applicable HUD rules, rather than an automatic current-equity shortcut.
Is every FHA annual MIP rate 0.55%?
No. Under the cited table, a standard case with a term over 15 years, base loan at or below $726,200 and LTV above 95% has a 0.55% annual rate for the mortgage term, subject to the table’s scope and exceptions. Other term, amount and LTV combinations differ. The table’s $726,200 threshold is not automatically replaced by a 2026 conforming or county loan limit. Do not treat a simple base-loan-times-rate division as the exact servicing bill without HUD’s applicable calculation.
Can refinancing remove FHA MIP or lender-paid PMI?
Paying off the old loan can end its insurance arrangement, but refinancing requires approval for a new loan and has costs. The new loan may have its own PMI, premium or rate tradeoff. Compare total cost over a realistic holding period, including financed charges and any remaining balance, rather than promising savings from eliminating one visible line.
Do VA and USDA loans use the same insurance?
VA-backed purchase loans require neither conventional PMI nor FHA MIP. A separate VA funding fee can apply unless the borrower qualifies for an exemption. USDA guaranteed loans use their own upfront and annual guarantee fees. USDA’s September 16, 2026 notice sets 1.00% upfront and 0.35% annual fees for fiscal year 2027, October 1, 2026 through September 30, 2027, on purchase and refinance transactions. These are program fees, not the mortgage interest rate; do not calculate a USDA financed fee by blindly copying the FHA base-loan method.
Eligibility and lender approval remain separate from the insurance label. These original study questions are not PSI questions or an account-specific cancellation determination.
Why do the FHA rules mention both June 2013 and March 2023?
The duration policy discussed here applies to case numbers assigned on or after June 3, 2013. The annual-rate table in Mortgagee Letter 2023-05 applies to endorsements on or after March 20, 2023. Assignment and endorsement are different events. Do not apply the old 2013 rate increases as current rates, or assume a recent website review date replaces either policy’s effective event.
Do I round FHA upfront MIP to the nearest cent?
HUD’s identified upfront collection instruction says not to round: drop a fraction of a cent. At a 1.75% standard premium, $279,850 × 0.0175 equals $4,897.375, collected as $4,897.37. This is a specific upfront-premium rule, not the separate monthly annual-MIP calculation or a rule for every exam arithmetic question.
Does cancelling PMI refund every premium already paid?
No. The HPA addresses returning unearned PMI premiums, with the borrower return due no later than 45 days after the applicable cancellation or termination. It does not refund all premiums already earned for past coverage, erase accrued premium obligations or establish the separate FHA refund rules. Upfront or split PMI arrangements also need their actual policy and applicable legal terms.
Can lender-paid PMI be cancelled with the ordinary 80% request?
The ordinary borrower-paid cancellation, termination and related notice sections excluded by 12 U.S.C. 4905(b) do not apply to lender-paid mortgage insurance. That coverage commonly involves a higher interest rate rather than a separate monthly borrower-paid premium. Reaching a value threshold does not automatically reduce that note rate. Loan payoff, refinancing or another termination is a different event; compare the full loan cost rather than calling the coverage free.
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Put financing into practice
Separate the loan terms, borrower requirements and lender duties in a fresh situation.
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Official sources and scope
Reviewed October 26, 2026 against the identified federal statutes and agency guidance. The rules and examples distinguish ordinary covered borrower-paid PMI from lender-paid insurance, FHA duration and special program cases. Check an actual loan’s dates, terms, servicer records and applicable program or investor rules before treating a study example as an account decision.
- PSI: Financing outline and whole-domain scope
- CFPB: PMI removal, reviewed August 28, 2026
- CFPB: lender protection and PMI payment formats
- 12 U.S.C. 4901: coverage, original value and payment history
- 12 U.S.C. 4902: cancellation, termination and modifications
- 12 U.S.C. 4905: lender-paid insurance provisions
- CFPB: 2012 HPA examination procedures, identified sections
- HUD ML 2023-05: upfront and annual premium tables
- HUD ML 2013-04: identified duration provisions
- HUD: final monthly MIP date guidance
- HUD: drop fractional cents in upfront MIP collection
- HUD: August 2026 handbook edition directory
- VA: no PMI or MIP on VA-backed purchase loans
- VA: funding fee and exemption guidance
- USDA: Chapter 16 guarantee-fee provisions
- USDA: September 2026 notice for FY 2027 fees
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.