PMI and MIP Explained for Arkansas Borrowers

What mortgage insurance is, when it applies, how to drop it.

What mortgage insurance is

Mortgage insurance protects the lender (not the borrower) against default loss when down payment is less than 20%. It’s a monthly payment that reduces lender risk — which is what allows low-down-payment loans to exist.

The three flavors

Conventional PMI

Private Mortgage Insurance. Cancels at 78% LTV automatically under the Homeowners Protection Act; borrower can request cancellation at 80%.

FHA MIP

Mortgage Insurance Premium. Upfront (1.75% of loan, rolled in) plus annual (0.55-0.85% paid monthly). On most post-2013 FHA loans, MIP persists for the life of the loan unless refinanced.

USDA guarantee fee

USDA’s equivalent — upfront 1% plus annual 0.35%. Lower than FHA MIP.

How to drop PMI

1. Automatic at 78% LTV (original schedule).
2. Borrower request at 80% LTV (written request; appraisal often required).
3. Early request with appraisal for appreciated value.
4. Refinance into conventional once 20%+ equity.