Mortgage Insurance Premium (MIP) would be used for which loan type?

• A. An FHA loan with a 3.5% down payment
• B. A conventional loan with a 20% down payment
• C. A VA loan with no down payment
• D. A USDA loan with no down payment

Answer: (A)

Mortgage Insurance Premium is the insurance required to protect lenders on FHA loans when the borrower makes a relatively small down payment. For FHA loans, MIP is mandatory even with a 3.5% down payment, and it appears as an upfront amount paid at closing plus a monthly annual MIP component folded into the mortgage payment. The rate and presence of MIP depend on the loan specifics, but the key point is that FHA loans require MIP. By contrast, a conventional loan with 20% down typically doesn’t require MIP (it uses PMI only if the down payment is under 20%). VA loans don’t use mortgage insurance at all (they have a funding fee instead), and USDA loans have their own guarantee fees, not FHA’s MIP.