PMI vs MIP vs Home Insurance: What Signing Agents Need to Know
Published August 9, 2024 · Updated May 21, 2026
As a notary signing agent, you will see PMI, MIP, and homeowners insurance listed on loan documents at nearly every closing. Borrowers often confuse them. Here is what each one is, how they differ, and what to know when they come up during a signing.
PMI (Private Mortgage Insurance)
What it is: Insurance that protects the lender (not the borrower) if the borrower defaults on a conventional loan.
When it is required: When the borrower puts down less than 20% on a conventional mortgage. Once the loan-to-value ratio reaches 80%, the borrower can request PMI cancellation. At 78% LTV, the lender must cancel it automatically (per the Homeowners Protection Act).
Who pays: The borrower, as part of their monthly mortgage payment or as an upfront premium.
Typical cost: $30–$70/month per $100,000 borrowed, depending on credit score and down payment.
MIP (Mortgage Insurance Premium)
What it is: The FHA equivalent of PMI. Also protects the lender, not the borrower.
When it is required: On all FHA loans. There are two parts: an upfront premium (UFMIP, typically 1.75% of the loan amount) and an annual premium (MIP, paid monthly).
Key difference from PMI: On FHA loans with less than 10% down, MIP cannot be canceled. It stays for the life of the loan. With 10% or more down, MIP drops off after 11 years.
Homeowners Insurance
What it is: Insurance that protects the borrower’s property against damage (fire, theft, wind, liability, etc.). This is completely different from PMI and MIP.
When it is required: Lenders require proof of homeowners insurance before closing. If the borrower lets it lapse, the lender will force-place insurance (usually at a higher cost).
Who it protects: The borrower’s investment. The lender is listed as a loss payee, meaning they get paid first if the property is destroyed.
Quick Comparison
| PMI | MIP | Homeowners Insurance | |
|---|---|---|---|
| Loan type | Conventional | FHA | All |
| Protects | Lender | Lender | Borrower’s property |
| Required when | Under 20% down | All FHA loans | Always |
| Cancelable? | Yes, at 80% LTV | Only if 10%+ down (after 11yr) | No — must maintain |
| Typical cost | $30-70/mo per $100K | 0.15-0.75% annually + 1.75% upfront | $50-150/mo |
What Signing Agents Should Know
- Borrowers frequently ask “Why am I paying mortgage insurance?” at the table. You can explain the difference between PMI/MIP and homeowners insurance. You cannot advise them on whether to keep or cancel it.
- If a borrower wants to dispute PMI or MIP, direct them to their loan officer or servicer.
- On the Closing Disclosure, PMI and MIP appear in different sections. PMI is in the “Other Costs” section. MIP may appear both upfront and monthly.
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Frequently Asked Questions
Can a borrower cancel PMI?
Yes. On conventional loans, borrowers can request PMI cancellation at 80% LTV. Lenders must cancel it automatically at 78% LTV. This is required by federal law (Homeowners Protection Act).
Can a borrower cancel MIP on an FHA loan?
Only if they put 10% or more down: then MIP drops off after 11 years. If they put down less than 10%, MIP stays for the life of the loan. The only way to remove it is to refinance into a conventional loan.
Does homeowners insurance protect the lender?
Partially. The lender is listed as a loss payee, so they are first in line for payout if the property is destroyed. But the primary purpose is to protect the borrower’s investment in the property.
Is PMI tax deductible?
It has been deductible in some years and not others, depending on Congressional action. Borrowers should consult a tax professional for the current tax year.
Can a signing agent explain PMI to a borrower?
You can explain what PMI/MIP is and how it differs from homeowners insurance. You cannot advise the borrower on whether they should keep it, cancel it, or refinance to remove it.
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