PMI vs. MIP: Mortgage Insurance in Texas Explained

I'm Bond Peter Njoku, a licensed Mortgage Loan Officer (NMLS #2670329), and mortgage insurance is one of the most confusing line items on a loan estimate — mostly because buyers hear "PMI" and "MIP" used almost interchangeably when they actually work quite differently. Which one you pay, how much it costs, and whether you can ever get rid of it depends entirely on which loan program you choose. I break this down for nearly every buyer I work with because the difference between these two can add up to thousands of dollars over the life of a loan.

PMI: Private Mortgage Insurance on Conventional Loans

PMI applies to conventional loans when your down payment is less than 20%. It's provided by private insurance companies, not the government, and the cost is priced based on your credit score, loan-to-value ratio, and loan amount. This means two buyers putting down the same 10% can pay very different PMI rates depending on their credit — a 760 FICO score buyer typically pays meaningfully less PMI than a 640 FICO score buyer on the same loan amount. That's one reason I spend time upfront looking at whether a small credit score improvement could lower a client's PMI cost before we lock a rate.

MIP: Mortgage Insurance Premium on FHA Loans

MIP applies to FHA loans and works completely differently. It has two parts: an upfront MIP of 1.75% of the loan amount (usually rolled into the loan rather than paid in cash), plus an annual MIP paid monthly as part of your payment. Unlike PMI, MIP rates are set by HUD and don't vary based on your credit score — a 580 FICO buyer and a 780 FICO buyer with the same down payment pay the same MIP rate. FHA loans require MIP regardless of down payment size, even at 20% down or more, which is a key difference from conventional financing.

How Removal Works for Each

This is where the two programs diverge the most. PMI on a conventional loan is required by federal law (the Homeowners Protection Act) to automatically cancel once your loan balance hits 78% of the original home value, and you can request removal yourself once you reach 80%, assuming you're current on payments. MIP works very differently — if you put down less than 10% on your FHA loan, MIP stays for the entire life of the loan no matter how much equity you build. If you put down 10% or more, it drops off after 11 years. For most FHA borrowers with less than 10% down, the realistic path to eliminating MIP is refinancing into a conventional loan once you've built enough equity — I cover that process in detail in my guide to removing mortgage insurance.

Which Program Actually Costs Less

There's no universal answer here — it depends on your credit score, down payment, and how long you plan to stay in the home. A buyer with excellent credit and a 5% down payment often pays less in PMI on a conventional loan than they would in MIP on an FHA loan with the same down payment, because PMI rewards strong credit and MIP does not. But a buyer with a lower credit score or a smaller down payment might find FHA's MIP structure more affordable than the PMI quote they'd get on a conventional loan. I run this comparison for every client using their actual credit profile — call or text me at 469-545-7180 and I'll show you the real numbers side by side rather than a generic rule of thumb.

Whether you're comparing FHA and conventional financing for a purchase in Garland, Mesquite, Fort Worth, or anywhere across DFW, I run the PMI vs. MIP math against your actual credit and down payment before you commit to a program. Call or text me at 469-545-7180, and take a look at my FHA vs. conventional comparison for the bigger picture beyond just mortgage insurance.