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Module 18 · Intermediate · 20 min

Mortgage Insurance Deep Dive

PMI, MIP, USDA Annual Fee, and the VA Funding Fee all behave differently. Understand cost, cancellation, and how FICO drives PMI pricing.

Learning Objectives
  • Differentiate PMI, MIP, USDA Annual Fee, and VA Funding Fee
  • Explain PMI cancellation rules under HPA
  • Describe FHA MIP duration based on LTV and term
  • Identify when single-premium or lender-paid MI makes sense

Conventional PMI

Required when LTV exceeds 80%. PMI premiums are priced by FICO and LTV — the same borrower can pay double at a 660 vs. a 760. Under the Homeowners Protection Act, PMI must drop off automatically at 78% LTV based on original value and can be requested at 80%.

FHA MIP

FHA charges an upfront MIP (currently 1.75%) financed into the loan, plus an annual MIP. With a down payment under 10%, annual MIP lasts the life of the loan; with 10%+ down it drops off at year 11.

USDA and VA

  • USDA — 1% upfront guarantee fee + 0.35% annual
  • VA — Funding Fee (1.25–3.3% based on use and down payment); no monthly MI
  • VA Funding Fee is waived for veterans with a service-connected disability rating
Key Takeaways
  • PMI is FICO-priced; small score moves create big cost moves.
  • FHA MIP usually stays for life unless 10%+ down.
  • VA has no monthly MI but charges a Funding Fee.
End-of-Module Exam

Module 18 Exam — 5 questions

Pick the best answer for each question. Pass with 80% or higher to mark this module complete.

  1. 1.

    PMI is required on Conventional loans when LTV exceeds:

  2. 2.

    Under HPA, PMI must drop off automatically at:

  3. 3.

    FHA annual MIP with less than 10% down lasts:

  4. 4.

    VA loans have:

  5. 5.

    PMI pricing is most affected by:

0 of 5 answered