What does MIP stand for?

MIP stands for Mortgage Insurance Premium, which is a crucial concept in the mortgage industry, particularly concerning loans that require mortgage insurance. This premium is typically associated with Federal Housing Administration (FHA) loans, where it serves to protect the lender in case of borrower default.

When a borrower makes a down payment that is less than 20% of the home's purchase price, lenders often require mortgage insurance to reduce their risk. MIP is generally paid on a monthly basis as part of the borrower's mortgage payment, but it may also include an upfront premium that can be rolled into the loan.

Understanding MIP is essential for mortgage loan originators because it influences both the cost of the loan for the borrower and the lender's risk management strategies. Knowing the implications of MIP helps MLOs provide better guidance to borrowers regarding their loan options, costs, and the type of insurance that may be needed based on their down payment amount and loan type.