Which statement correctly describes MIP vs PMI applications?

• A. PMI applies to FHA; MIP applies to conventional.
• B. MIP applies to FHA loans; PMI applies to conventional loans.
• C. MIP applies to VA; PMI applies to FHA.
• D. MIP applies to USDA; PMI applies to VA.

Answer: (B)

Understanding mortgage insurance types helps explain this correctly: Mortgage Insurance Premium (MIP) is the insurance program for loans insured by the FHA, while Private Mortgage Insurance (PMI) is the insurance for conventional loans that aren’t government-guaranteed. Because of that, the statement that MIP applies to FHA loans and PMI applies to conventional loans is the accurate pairing. The other options mix up which programs use which type of insurance (for example, FHA uses MIP, not PMI; VA and USDA have their own fee structures and do not use PMI in the same way), so they don’t fit the standard setup. This distinction matters because it influences loan costs and how long the insurance requirement lasts.