Which loan type typically requires a Mortgage Insurance Premium (MIP)?

• A. Conventional loans.
• B. FHA loans.
• C. VA loans.
• D. USDA loans.

Answer: (B)

Mortgage insurance premiums are tied to the loan program, specifically to government-backed or insured loan types. FHA loans require MIP as part of the financing structure. This includes an upfront MIP paid at closing and an ongoing monthly MIP included with mortgage payments. The purpose is to protect the lender when a borrower has a smaller down payment and a higher loan-to-value ratio.

Other loan types handle insurance differently. Conventional loans may require private mortgage insurance (PMI) if the down payment is less than 20%, but that is PMI rather than MIP. VA loans do not require mortgage insurance at all, though they include a funding fee. USDA loans use a guarantee or annual fee instead of MIP.