How does MIP typically operate for FHA loans compared to PMI for conventional loans?

The operation of Mortgage Insurance Premium (MIP) for FHA loans compared to Private Mortgage Insurance (PMI) for conventional loans is clearly established in the terms associated with each. MIP is primarily a requirement for FHA loans and, unlike PMI, often remains in effect for the life of the loan, particularly for those loans originated after June 3, 2013. This means that once the borrower takes out an FHA loan and pays their MIP, they are likely paying this premium until the loan is paid off, regardless of the loan-to-value (LTV) ratio.

In contrast, PMI is generally designed to protect lenders against default in the case of conventional loans. Borrowers can typically request the cancellation of PMI once their loan balances drop below 80% of the original property value, providing them the opportunity to stop paying this insurance when they've accrued enough equity in their homes.

Thus, the distinction that MIP remains for the life of the loan while PMI can be removed when certain conditions are met clearly indicates the different approaches to mortgage insurance taken by FHA and conventional loan programs.